EXTRAORDINARY AMAZING EVERYWHERE ANNUAL REPORT 2019 2 SES ANNUAL REPORT 2019 COMPANY OUR 1 for allourstakeholders. and thevalue that to weseek create what weat SESwant to achieve andambitionsreflectOur purpose and what wedomakes adifference. We are partofsomething bigger ON EARTH EVERYWHERE EXPERIENCES AMAZING TO DELIVER IN SPACE EXTRAORDINARY THE WE DO OUR PURPOSE REPORT AND STRATEGIC OPERATIONAL 2
STATEMENTS FINANCIAL CONSOLIDATED 3
ACCOUNTS SES S.A.ANNUAL 4 difference We are here to make a SES isagreat to work place success oncustomerexperience andfocused We are customer passionate about growthsustained andinnovation We are future-proof, powered by connectivity intelligentsatellite-based We provide Cloud-enabled, everywhereconnectivity We believe and incontent OUR AMBITIONS
INFORMATION ADDITIONAL 5 3 SES ANNUAL REPORT 2019 18 16 14 12 10 8 6 4 1 COMPANY OUR 1 COMPANY OUR
A longhistory ofinnovation Generating growth sustained of everything we do are at theheartOur talented people around theworld Making adifference to billionsall everywhere onEarth Delivering amazingexperiences theextraordinaryDoing inspace solutions connectivity Significant demandfor content global solutions connectivity content inglobal Leader REPORT AND STRATEGIC OPERATIONAL 2
STATEMENTS FINANCIAL CONSOLIDATED 3
ACCOUNTS SES S.A.ANNUAL 4 INFORMATION ADDITIONAL 5 4 SES ANNUAL REPORT 2019 COMPANY OUR 1 REPORT AND STRATEGIC OPERATIONAL 2 “ technology, oreven gravity.” by geography,want itto go—unlimited freedom to take your story wherever you At SES, webelieve you shouldhave the SES CEO Steve Collar, SOLUTIONS CONNECTIVITY CONTENT LEADERINGLOBAL STATEMENTS FINANCIAL CONSOLIDATED 3
ACCOUNTS SES S.A.ANNUAL 4 INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
366 million TV homes served by SES
Only multi-orbit and multi- At SES we believe that each of us is the author of our frequency satellite- enabled solutions provider own story and we all have ideas and plans for where we want that story to go.
As as the leader in global content connectivity €1.98 BN 2019 group solutions we leverage a vast and intelligent revenue network that spans satellite and ground infra structure—connecting more people in more places with content that enriches their personal stories with entertainment, knowledge and opportunity. 99% of the world population We do the extraordinary in space to deliver amazing covered by SES experiences everywhere on Earth. Because when
ANNUAL REPORT 2019 REPORT ANNUAL everyone is empowered with content and connectivity,
SES billions of stories have infinite possibilities. 5 6 SES ANNUAL REPORT 2019 COMPANY OUR 1 “ industry.” willremainvideo adominantforce inthesatellite anywhere, anytime. demandfaces Whilevideo hurdles, promising, driven by for aglobalneed more connectivity Long-term projections for thesatellite industryare Northern Sky Research SOLUTIONS DEMAND SIGNIFICANT CONTENT CONNECTIVITY CONTENT GLOBAL FOR REPORT AND STRATEGIC OPERATIONAL 2 STATEMENTS FINANCIAL CONSOLIDATED 3
ACCOUNTS SES S.A.ANNUAL 4 INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Satellite offers communication The consumption and demand for Demand for connectivity is growing without limits. From space, satellite content on any device, any place and exponentially and powered by Cloud can provide connections almost any time is increasing and proliferat applications: mobility (especially immediately and virtually any ing, putting pressure on traditional aero and maritime), fixed data where—on land, at sea or in the TV platforms. Broadcasters are in the (rural inclusion and mobile backhaul) air—without the need for substantial process of right-sizing content and government (ISR, e-inclusion, and highly costly infrastructure. carried over satellite but satellites disaster recovery). Critical success remain essential for mass coverage factors are the combination of expe and premium content. rience, performance and economics.
Almost $9+ BN 479 min 26+% 500,000 Expected growth in a day of content CAGR internet global commercial aircraft satellite operator consumed in average2 traffic growth3 and vessels4 revenue 2019 – 20281
1 Source: Euroconsult, The Space Economy Report (Satellite Value Chain), December 2019.
ANNUAL REPORT 2019 REPORT ANNUAL 2 Source: Zenith Media Consumption Forecasts 2019, June 2019 . 3 Source: Cisco Visual Networking Index: Forecast and Trends, 2017–2022.
SES 4 Source: NSR, Satellite Industry Financial Analysis (9th Edition), October 2019 7 8 SES ANNUAL REPORT 2019 COMPANY OUR 1 “ applications.” com tent anddata over satellite andproviding orbits, revolutionising thedelivery ofcon first andonlyplayer operating inmultiple We are leadingtherace inspace the being CTO SES Ruy Pinto, pletely andcustomer newopportunities REPORT AND STRATEGIC OPERATIONAL 2 EXTRAORDINARY DOING THE DOING STATEMENTS FINANCIAL CONSOLIDATED 3
IN SPACE ACCOUNTS SES S.A.ANNUAL 4 INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SES is the only global content connectivity solutions provider to operate a multi-orbit, multi- frequency satellite-based network. Operating such a vast, intelligent and reliable network in space is literally rocket science. We have been doing the extraordinary in space for over 30 years.
Spectrum and the optimal usage lies at the 50+ heart of our work. With more than 50 satellites satellites in Geostationary Earth Orbit in Geostationary Orbit we can offer solutions for a huge variety of spectrum—Ku-band, Ka-band and C-band.
With our unique and complementary Medium 20 Earth Orbit constellation—and with the second satellites in Medium one to be launched in 2021—we unlock new Earth Orbit business opportunities for our customers in providing far more flexibility and enabling a far greater array of optimised applications such as 99.999% latency sensitive ones. network reliability In the near future, the SES satellite network will provide a seamless extension of Cloud and terres 4 times faster trial applications to all corners of the world. MEO latency ANNUAL REPORT 2019 REPORT ANNUAL vs. GEO SES 9 10 SES ANNUAL REPORT 2019 COMPANY OUR 1 EVERYWHERE EXPERIENCES DELIVERING AMAZING REPORT AND STRATEGIC OPERATIONAL 2 ON EARTH “ problems of theircustomers.” andtrulytryingtoquestions understand the avery joboflistening,SES does good asking STATEMENTS FINANCIAL CONSOLIDATED 3
Panasonic Avionics Corporation DirectorSenior GlobalCommunications Services, Todd Hill, ACCOUNTS SES S.A.ANNUAL 4 INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Our customers are part of our family and our success depends on their success. We are passionate about customer experience and delivering world-class services that enable our customers—some of the world’s largest companies, governments and insti tutions—to be successful in taking their story anywhere.
In Video, we are the trusted partner to world-leading 1,250+ 1+ BN SES people rely on broadcasters, platform operators and content customers SES Video owners in providing unparalleled audience reach and distribution economics. We have established leadership in delivering the highest-quality viewing experiences and maximising the value of our cus Up to tomers’ content. 1 GBps MEF 2.0 In Networks, we provide unparalleled, fibre-like connectivity from just one Only MEF CE 2.0 telco- O3b (MEO) beam grade certified satellite- connectivity solutions to the world’s largest govern- based network operator ments, telecommunications companies, mobile network operators, aeronautical service providers, cruise lines and Cloud service providers. We enable
ANNUAL REPORT 2019 REPORT ANNUAL our customers to extend the reach of their networks
SES to more places, more people and more devices. 11 12 SES ANNUAL REPORT 2019 COMPANY OUR 1 “ Europe once onSkype.” aweek was abletoof hope being withmy speak kidsin In themidstofsorrow, andfear, loss theonlyspark DIFFERENCE MAKING A TO BILLIONS REPORT AND STRATEGIC OPERATIONAL 2 ALL AROUND camp inSyria living inarefugee Anonymous person THE WORLD STATEMENTS FINANCIAL CONSOLIDATED 3
ACCOUNTS SES S.A.ANNUAL 4 INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
What we do at SES meaningfully By doing the extraordinary in space, Our superpower is our truly global contributes to making the world a we are bringing connectivity to reach and, combined with constant better place and is an important part remote populations; pioneering innovation, we intend to continue of what drives us. We believe that by new technologies to drive social, to use this superpower to make a enabling people to connect with the environmental and economic im difference. world’s content, we can provide them provement globally; as well as re with the opportunities they need to storing critical connectivity following grow and flourish. natural disasters.
3.5+ BN 1,000 12 locations 500+ hours people without access remote sites provided with deployed with connectivity spent by SES employees in to the internet today1 300Mbps together with in 7 emergency.lu missions charity activities in 2019 INRED in Columbia in 2019 in 2019 ANNUAL REPORT 2019 REPORT ANNUAL
SES 1 Source: ITU, facts and figures 2019 13 14 SES ANNUAL REPORT 2019 COMPANY OUR 1 OUR TALENTED PEOPLE REPORT AND STRATEGIC OPERATIONAL 2 WEDO AREAT THEHEART OFEVERYTHING STATEMENTS FINANCIAL CONSOLIDATED 3 “ eyes of akidwhogainsaccess to information andlearning.” a live sportsevent inthe with friendsorthethankyou message create somethingpositive. thesmileofacustomer, Thiscanbe united by theambition to grow personally, to give backandto me to workinatrulyinternational environment all withpeople We are allpart of somethingbigger. Ihave chosenSESasitenables
ACCOUNTS SES S.A.ANNUAL 4 Software Engineer Divya Chauhan,
INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Our people are dedicated to delivering amazing experiences and making a difference. Whether it’s to help driving global digital equality, allowing people to stay connected to the world while at 30,000 feet, or enabling hundreds of millions of households to access a wide range of entertainment and news.
At SES, we believe that people are our most important asset and in bringing together an SES community of diverse individuals and giving them the tools to grow is paramount to bringing the 2,100+ best to our customers, everyday. employees We are focused on establishing a culture of high performance based on a growth mindset and aspires for everyone at SES to be: • In it together • Proud to be here 80+ • Transparent, honest and courageous nationalities
14,700+ hours of training completed by SES employees in 2019 ANNUAL REPORT 2019 REPORT ANNUAL SES 15 16 SES ANNUAL REPORT 2019 COMPANY OUR 1 REPORT AND STRATEGIC OPERATIONAL 2 GROWTH SUSTAINED GENERATING STATEMENTS FINANCIAL CONSOLIDATED 3
“ CEO ofSES Steve Collar and strong balance sheet.” works solutions,world-leadingDTH neighbourhoods turns from fast thecombination ofSES’ we aimto drive long-term growth andshareholder re With clearstrategic andfocus onexecution, priorities ACCOUNTS SES S.A.ANNUAL 4 - growing net INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Our Networks business is the growth Reach is also our superpower when it This combination of two world-lead engine of SES. We are expanding our comes to delivering high-quality linear ing businesses supports strong addressable market well beyond video content with unrivalled reliability long-term growth potential, high traditional market segments to make and distribution economics. Our core profitability margins, and strong cash our Cloud-enabled, satellite-based DTH neighbourhoods offer substantial generation capabilities. This is intelligent connectivity solutions part content monetisation capabilities for underpinned by strong balance of the mainstream network ecosystem. which our customers continue to sheet and liquidity metrics consist We leverage our vast global network make long-term commitments, result ent with our commitment to SES’ and managed end-to-end solutions ing in a large contract backlog and investment grade credit status to expand our customers’ reach and great visibility of future revenue. (currently Baa2/BBB–). growing our business as they do.
+20% €3.9 BN 61% 3.22 times SES Networks underlying fully protected video Group EBITDA net debt to ANNUAL REPORT 2019 REPORT ANNUAL growth (last 2 years) contract backlog margin EBITDA ratio SES 17 18 SES ANNUAL REPORT 2019 COMPANY OUR 1 REPORT AND STRATEGIC OPERATIONAL 2 A LONG OF INNOVATION HISTORY STATEMENTS FINANCIAL CONSOLIDATED 3
“ unprecedented level oftechnology integration scalablefor allorbits.” We are proud that we,together withSES, have jointlydeveloped this level, offering avisionaryroadmap for next generation technology. performance andflexibility, whichsets thetechnology at thehighest O3b mPOWER isauniquesystem withexponentially more power,
Boeing SatelliteBoeing Systems International Chairman andCEO, Paul Rusnock, ACCOUNTS SES S.A.ANNUAL 4 INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
1st successful non-geostationary orbit constellation with O3b SES’ story is one of a group of pioneers and innovators overcoming technical, political and commercial obstacles to become a leader in global content connectivity solutions. In doing so, we have contributed to the creation of new st industries, sectors and jobs all over the world. 1 to use SpaceX Falcon 9 Our history of innovation started in 1985 with the idea that for commercial launch satellite could be used to broadcast TV channels all over Western Europe. Now SES distributes over 8,300 TV channels st and serves 366 million global TV homes! 1 commercial satellite to launch using SpaceX’s Today, we are redefining what it means to deliver high-quality reusable rocket connectivity experiences anywhere, anytime in the world. Positioned in multiple orbits, and at close to launching the second generation of the scalable O3b mPOWER constellation, we will leverage the ability of our intelligent network to provide €10 million unique flexibility, coverage, performance and Cloud integration. invested in start-up space and technology funds Together with our partners we set standards in terms of
ANNUAL REPORT 2019 REPORT ANNUAL reusable launchers, electric propulsion, flexible payloads and
SES driving down cost per bit. 19 20 SES ANNUAL REPORT 2019 COMPANY OUR 1 42 42 40 38 37 34 33 27 25 23 22 21 BUSINESS POSITION STRATEGIC REPORT OPERATIONAL AND 2 REPORT AND STRATEGIC OPERATIONAL 2 Financial Review SES Networks Performance PerformanceSES Video Operational Review NetworksSES Global ModelBusiness Key Market Trends &Positioning Letter from theChiefExecutive Letter from theChairman Our Company Financial Highlights STATEMENTS FINANCIAL CONSOLIDATED 3 75 70 67 60 59 57 CORPORATE GOVERNANCE 55 51 49 47 45 CORPORATE RESPONSIBILITY
Principal RisksPrincipal Internal Control Procedures Leadership TeamSenior (SLT) Board ofDirectors &Committees Governance Chairman’s onCorporate Report Shareholder Structure Governance Matters Matters Social Environmental Matters Matters Societal Our Approach &Impact ACCOUNTS SES S.A.ANNUAL 4 88 88 87 86 86 86 83 83 REMUNERATION REPORT
Compensation PackageCompensation SLT Remuneration Directors Remuneration Periodic Review Disclosure Shareholder Vote The Policy ofthePolicy andScope Purpose INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
BUSINESS POSITION
FINANCIAL HIGHLIGHTS Net Cash Generated by Revenue Earnings Per Share Operating Activities €1,983.9 million €0.54 per share €1,134.1 million
(2018: €2,010.3 million) (2018: €0.54 per share) (2018: € 1,191.3 millon)
EBITDA Proposed Dividend Per Share Net cash absorbed by investing activities €1,216.6 million €0.40 per share €307.8 million
(2018: €1,255.5 million) (2018: €0.80 per share) (2018: €320.8 million)
Free Cash Flow (FCF) before Operating Profit Net Debt to EBITDA Ratio financing activities €365.4 million 3.22 times €826.3 million
(2018: €391.1 million) (2018: 3.29 times) (2018: €870.5 million)
Net Profit Attributable to SES Shareholders Fully protected contract backlog FCF as a percentage of Revenue €296.2 million 6.3 billion 41.7% ANNUAL REPORT 2019 REPORT ANNUAL (2018: €292.4 million) (2018: 6.8 billion) (2018: 43.3%) SES 21 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
OUR COMPANY Purpose and Ambitions G01
At SES, we do the extraordinary in space to deliver amazing expe OUR PURPOSE OUR AMBITIONS riences everywhere on earth by distributing the highest picture quality video content and providing seamless connectivity (aero and mobility) We believe in content and around the world. WE DO THE connectivity everywhere As a world leading integrated satellite-enabled solutions provider, SES We provide Cloud-enabled, is a trusted partner to the world’s leading telecommunications EXTRAORDINARY satellite-based intelligent connectivity companies, mobile network operators, governments, connectivity (aero and mobility) and Cloud service providers, broadcasters, video IN SPACE TO We are future-proof, powered by platform operators and content owners. SES is providing services sustained growth and innovation through its two market-leading businesses: Networks and Video. DELIVER AMAZING We are passionate about customer SES Networks operates the world’s only multi-orbit constellation of experience and focused on customer satellites with the unique combination of global coverage and high EXPERIENCES success performance, low-latency Medium Earth Orbit O3b system. By lever aging a vast and intelligent, Cloud-enabled network, SES is able to EVERYWHERE SES is a great place to work deliver high quality connectivity solutions anywhere on land, at sea or in the air. ON EARTH We are here to make a difference SES’ Video has an unparalleled reach of 366 million households, serving over 1 billion people worldwide with high quality viewing expe riences, and delivers managed media services for both linear and OUR POSITIONING OUR PROMISE non-linear content. Every one of us is the author of our The Company is listed at the Paris stock exchange and the Luxem LEADER IN own story. We believe everyone should bourg stock exchange (Ticker: SESG). have the freedom to take their story wherever they want it to go—unlimited GLOBAL CONTENT by geography, technology, or even gravity. Because when everyone is empowered CONNECTIVITY with content and connectivity, billions SOLUTIONS of stories have infinite possibilities. ANNUAL REPORT 2019 REPORT ANNUAL SES 22 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
LETTER FROM THE CHAIRMAN
2019 was another important year for our company where, against the In the last two years, our Networks business has expanded with backdrop of changing and challenging trading conditions, SES deliv double-digit growth, delivering on the opportunity to extend satellite- ered a robust financial and operational performance. based connectivity everywhere on Earth with an important and dif ferentiated investment programme. In 2019, we successfully launched For the year ended 31 December 2019, the group generated total rev and brought the final four satellites into service for the first genera enue of €1.98 billion, EBITDA of €1.22 billion, net profit of €296 million, tion of our unique Medium Earth Orbit, O3b constellation, expanding and free cash flow before financing activities of €826 million reflect low latency services to major telcos, mobile network operators, ing a strong focus on cash flow generation. government clients and cruise lines.
Our Video business is facing challenges in the near-term as our cus This year, we also completed our initial investment programme in tomers—the world’s leading broadcasters, platform operators and Geostationary high throughput satellite (HTS) capabilities, with the content owners—adapt their business models in response to the entry into service of SES-12 and deployment of important rural broad changes in consumer behaviour. Despite this, our Direct-to-Home band and mobile connectivity services, bridging the digital divide in neighbourhoods grew in reach for an eighth consecutive year and Asia. SES-12 will also cater to the growing demand for Aeronautical SES is now serving audiences in more than 366 million households connectivity, complementing the significant new business secured in around the world, more than any other satellite operator. the Americas on SES-15 and SES-14 during 2019 which contributed to double-digit growth in SES’ Mobility revenue. Satellite remains the most reliable and cost-effective platform for our customers’ most valuable content and in 2019 the number of High Demonstrating the value of SES’ investment grade status, the com Definition and Ultra High Definition TV channels grew to almost 3,000 pany successfully completed €500 million of new financing at a TV channels, some 1,300 TV channels more than the next operator record-low annual coupon this year and renewed the €1.2 billion credit and underscoring the long-term attraction of SES’ highly profitable, facility at rates below the previous facility. market-leading Video neighbourhoods and connecting global audi Romain Bausch, Chairman of the Board of Directors ences to the best content. In total, SES has raised over €1.4 billion of new financing in the last two years at an average cost of below 1.5%, allowing the company to retire maturities carrying an average annual cost of over 3% and reducing SES’ overall cost of capital. ANNUAL REPORT 2019 REPORT ANNUAL SES 23 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
In view of the important investments in SES-17 and O3b mPOWER As we look to 2020 and beyond, our company is in a great position to that peak in 2021, and of SES’ commitment to an Investment Grade continue to grow from strength to strength. With a clear and compelling credit rating, the Board took the prudent decision to propose a 2019 purpose and set of ambitions, talented and innovative people, a unique dividend per A-share of €0.40 to shareholders. The Board considers set of capabilities and value proposition, and an enthusiastic and that this dividend level, which is well covered by earnings, proves an experienced Board, I am confident that SES will continue to lead our attractive return to shareholders while supporting the short-term industry forward and create value for all our stakeholders over this investment peak. new decade just as we have done in the decades before.
The SES transformation is also taking place at the level of the Board. Let me finish by sharing with you my decision not to stand up for This year, the Directors voted to reduce the size of the Board to 12, re-election as Chairman of SES. I have been at at the helm of the down from 15 in 2018 and from 18 in 2015, becoming more focused company for 25 years, firstly as CEO and latterly as Chairman and and agile. with the company now entering an exciting period of transforma tion under Steve Collar’s leadership and with a newly invigorated I would like to take this opportunity to thank Hadelin de Liedekerke and streamlined Board, I consider it to be the right time to pass the Beaufort, Marc Beuls, Victor Casier, Conny Kullman, Marc Serres, baton to a new Chair in the renewed Board. It has been a true privi François Tesch, Jean-Paul Senninger, and Jean-Paul Zens for their lege to serve SES in these different roles and I want to thank our contribution, commitment and service to SES and the Board and wish shareholders for their continued support. them well.
Accordingly, I am delighted that Peter van Bommel, Béatrice de Cler mont-Tonnerre, Frank Esser and Paul Konsbruck agreed to join the SES Board, and each will bring strong competencies complementing those of the rest of the Board. Romain Bausch Chairman of the Board of Directors On behalf of the Board, I would also like to share our appreciation for Andrew Browne, who stepped down as CFO last November, and look forward to welcoming Sandeep Jalan who will take over as our new CFO in May this year. ANNUAL REPORT 2019 REPORT ANNUAL SES 24 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
LETTER FROM THE CHIEF EXECUTIVE DRIVING CUSTOMER SUCCESS ACROSS THE BUSINESS Our 2019 operational and financial performance reflects a solid year of execution and focus on transforming our business for the future to Our passion for delivering best-in-class customer experience again fulfil our purpose to do the extraordinary in space to deliver amazing resulted in many notable successes in 2019. experiences everywhere on Earth. On the Networks side, we delivered new and expanded connectivity SOLID 2019 OPERATIONAL AND solutions in aero with Thales Avionics, Gogo and Collins Aerospace, FINANCIAL PERFORMANCE supporting commercial airlines and business jets; and in cruise with the likes of Carnival, MSC, Genting and Ritz-Carlton, strengthening our We are satisfied with our 2019 performance which delivered EBITDA, market-leading position in this segment. In addition, 2019 saw us launch net debt to EBITDA and CapEx metrics all in line with our financial a managed end-to-end service supporting the European Maritime outlook. Safety Agency to deliver search and rescue, environmental and other critical applications using an unmanned civilian aviation platform. Networks revenue, up 4.5% on an underlying basis in 2019 and with over 20% growth in the last two years, was in line with our expecta On land, we are using our unique multi-orbit network to extend the tions, driven by a double-digit performance in Mobility and solid reach of telco, mobile and cloud infrastructure. In 2019, we deployed growth in Government. In Fixed Data, we also signed and deployed ‘life-changing’ broadband and mobile services that meaningfully several important connectivity networks that will contribute to future improve connectivity for people in rural areas all over the world includ revenue development. ing Burkina Faso, Columbia, Indonesia, and Pakistan. I am also really pleased that our scalable and reliable solutions allowed us to restore Video revenue was slightly lower than we anticipated, driven largely critical connectivity and disaster recovery services that made a dif by single deal that we had expected to close at the end year that ference to the people of Papua New Guinea after a major earthquake. Steve Collar, CEO would have put us within the range. The business continues to respond the ongoing evolution of media consumption with DTH and In Video, our technical reach grew from 355 million to over 366 million Lastly, we made progress in creating new products and services to cable customers right-sizing their capacity utilisation and commit TV homes and we now carry almost 3,000 HD and UHD TV channels cater to the changing needs of our customers and, in doing so, allow ments. This, along with our decision to exit certain unprofitable services to audiences around the world. Both these metrics underscore the us to ‘modernise’ satellite. These included a partnership with Microsoft contracts, led to a decline of 7.8% in underlying revenue. lasting attraction of our industry-leading DTH neighbourhoods. to develop a new media delivery service on Azure, a Satellite and OTT in sync solution, as well as expanding our SES 360 solution. Nevertheless, strong focus on execution and control over discretion Across our core, industry-leading neighbourhoods, we signed impor ary spending ensured we delivered EBITDA in line with our financial tant renewals including with ProSieben, RTL, Crown Media, and sev In Germany, our most important DTH market where we serve over outlook for the second consecutive year, with net debt to EBITDA eral other U.S. cable operators; launched commercial 4K services with 50% all households, we secured a key win with Panasonic and Samsung consistent with our commitment to investment grade. Pleasingly, we RCN in the U.S.; as well as establishing new and/or expanded video who are now integrating our HD+ offering directly into their new TV also reported a net profit increase of 1.3% to €296 million and CapEx platforms in Brazil, Benin, Ethiopia, Indonesia, and the Ivory Coast. sets, with other manufacturers to follow. of €308 million was 30% lower than our forecast, also for the second ANNUAL REPORT 2019 REPORT ANNUAL consecutive year. In 2019, our Sports & Events team was instrumental in bringing the
SES Eurovision Song Contest, FIFA Women’s World Cup and other major, successful events to audiences across our video neighbourhoods. 25 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
REALISING OUR AMBITION OF INTELLIGENT Accordingly, we recently launched a programme of initiatives that We are delighted with the significant step taken by the U.S. FCC, on CONNECTIVITY represent the next phase in our strategic transformation which started 28 February 2020, in voting a final Report and Order that delivers the with the creation of the Video and Networks business units in 2017. win-win-win outcome that SES and members of the C-Band Alliance We are getting closer to the launch of both SES-17 and O3b mPOWER The programme, Simplify & Amplify, comprises four major initiatives: have advocated and supported for almost three years. and we have made substantial progress over the last year in the devel opment of our seamless, automated, cloud-scale multi-orbit network. • Create pure-play verticals: by investigating the potential sepa The Order will facilitate U.S. leadership in 5G, protect millions of U.S. ration of Networks within SES and, in doing so, provide greater vis TV households and critical broadcast services, and generate substan Notably we partnered with Microsoft to extend Azure ExpressRoute ibility to the market, increase operational focus within the two busi tial value for SES in the form of $3.97 billion of accelerated relocation services across our network, began working with Amdocs to build an nesses, and maximise strategic flexibility. payments which will be used to enhance value through a combination automation and orchestration layer in ONAP, and are developing our • Focus on core strengths: by concentrating our capabilities and of pragmatic delevering, targeted investments focused on our Adaptive Resource Control with Kythera. Most recently, we began offerings across each of the markets on profitable segments and fast-growing Networks business and return to shareholders. testing multi-beam customer edge terminals with Isotropic for a range resulting in a stronger, more focused SES with world-leading prod of global connectivity applications. ucts and solutions in the areas where we excel. Our focus now is on working diligently with our customers to protect • Simplify operations: by realigning resources to maximise effi and enhance our services while undertaking the largest and most Pleasingly, we also signed our first O3b mPOWER customers with ciency and generate EBITDA optimisation ramping to €40-50 mil complex spectrum repurposing effort ever undertaken. Carnival’s Global Experience and Innovation team extending multi- lion annually from 2021 due to the focus on core strengths and orbit operations to all Princess Cruise Line vessels, as well as agree simplification of the business. A LEADER IN GLOBAL CONTENT ments with Orange in Africa and a second telco to leverage the unique • Innovate for the future: by deepening our commitment to innovation CONNECTIVITY SOLUTIONS backhaul capabilities of O3b mPOWER. including putting in place a cloud practice that will serve our entire business, creating an innovation hub, investing in architectures and In summary, 2019 was an important year for SES and 2020 is already Along with Thales Avionics’ significant commitment to SES-17, these enabling technologies, and developing a cross-functional team to shaping up to be even more exciting, notwithstanding the challeng contracts underpin our confidence in the ability of our Networks busi look at the delivery on linear video into mobile and WiFi networks. ing market and macro environment in which we find ourselves. ness to sustain double-digit revenue growth for the foreseeable future. Simplify & Amplify is an important programme for SES that will ensure Our 2020 priorities reflect a laser focus on execution throughout the The power of our combined GEO/MEO network was further under we are in the best position to take advantage of the significant oppor business while, at the same time, transforming SES to take full advan scored when we successfully completed our first seamless and unin tunities ahead of us. tage of the future opportunities ahead in our fast-growing Networks terrupted multi-orbit inflight connectivity demonstration, with Thales verticals and sharpening our focus on the cash generating and value Avionics, paving the way for our MEO network to enhance and disrupt LANDMARK C-BAND DECISION REACHED sustaining priorities across our market-leading Video business. aviation services much as it has in cruise. IN THE U.S.
CONTINUING SES’ STRATEGIC Finally, this year was also a very important one with respect to the TRANSFORMATION repurposing of the part of the C-Band spectrum in the U.S.
We believe in content and connectivity everywhere and are position In 2019, we developed a technically validated plan that increased the Steve Collar ing SES to deliver growth and value for our customers, shareholders amount of clearable C-Band spectrum to 300 MHz, of which 280 MHz CEO ANNUAL REPORT 2019 REPORT ANNUAL and other stakeholders. would be available to facilitate 5G deployment in the U.S. and continued
SES to build on our engagement with the prospective users of the spectrum. 26 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
KEY MARKET TRENDS & POSITIONING PROSPECTS FOR THE SATCOM SECTOR
SATELLITE COMMUNICATION SOLUTIONS Satellite Commercial Value Chain G02 Satellite communication will continue to play an important role in 1 Revenue 2018 in USD bn global media and communications. According to Euroconsult total The Satellite Communication (SatCom) sector constitutes a part of Revenue 2028e in USD bn revenues of the SatCom sector totalled USD 143 billion in 2018 and the Satellite Industry which also includes Navigation and Earth are expected to reach USD 173 billion in 2028, representing a growth Observation. rate of 21%. Satellite 3 3 Manufacturers As the mainstay of the industry, the SatCom sector offers state-of- The largest part of the revenue opportunities is expected to be the-art network technologies, managed services and various commu generated in the satellite operations and satellite services value nication solutions such as video delivery and data connectivity. It stages. The segment revenues are forecasted to grow by 23% to can be divided in upstream and downstream activities. The first com USD 165 billion in 2028. The Video segment, as part of the service prising satellite manufacturing, launch and operations and the latter Satellite 1 1 value stage, is expected to constitute the majority of this revenue launchers service and ground network providers. growth.
As a leader in global content connectivity solutions, SES follows an VALUE CHAIN In recent years the momentum of the industry has shifted from Video integrated approach with business activities spanning across the Satellite 12 21 centric to Network centric. The main drivers for this shift have been value chain. SES both operates as satellite operator and in some Operators technology developments such as a reduction in launch costs, the business areas also as a satellite service provider (Managed Service improved payload efficiency resulting in lower cost per bit, ground Provider), for instance in the Cruise segment. technique and antenna equipment, and Cloud adoption. Satellite 124 144 Service Increased requirements for bandwidth, growing demand for mobility Providers based applications for both commercial and government sectors and rising public funding for social inclusion programs are driving expo nential demand for connectivity. Ground Network 3 4 Providers
End- Customers
TOTAL 143 173 ANNUAL REPORT 2019 REPORT ANNUAL
SES 1 Euroconsult, December 2019 27 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Industry Trends, Major Market Trends and SES Focus G03
SATELLITE COMMUNICATIONS VIDEO NETWORKS
• Strong competitive advantages of satellite-based commu • Important shifts in media content consumption patterns • Exponential growth in demand for fixed and mobile con nication offering substantial global coverage; instant and ›› see page 29 leading to reducing number of linear TV nectivity solutions around the globe, powered by Cloud and scalable infrastructure; as well as reliable, secure and channels Telco network expansion ›› see page 30 cost-effective solution • Big media brands driving consolidation in response to new • Substantial growth in addressable market and opportunity • Substantial connectivity opportunities for satellite operators entrants and / or media business models make satellite part of the mainstream global ecosystem, and service providers driving strong SatCom industry • Fibre-to-the-Home and Mobile infrastructure expanding especially in Mobility, Government and Fixed Data growth outlook • Satellite remains essential for mass market and premium • Competition from new satellite-based systems and new • Spectrum is a key differentiator—it is a scarce resource content (e.g. live sports, news and major TV events) entrants while traditional Satellite Service Providers under and highly regulated at international level • Growing audiences and demand for new content in emerg pressure from new business case requirements • Technological advances improving capability and produc ing markets • Cloud- and Telco-inspired technologies are driving changes tivity of satellite, unlocking new business models and • Cloud-based workflows and applications becoming the new and new approaches to satellite network systems architecture addressable markets normal to support efficient, cost-effective distribution of MAJOR MARKET TRENDS MARKET TRENDS MAJOR content across multiple platforms and devices
• Only multi-orbit (GEO / MEO) global satellite-based network • Unparalleled audience reach of 366 million global TV • Unique multi-orbit network with combination of global • Priority access to C-, Ku-, Ka- and X-band spectrum across homes underpinning industry-leading Direct-To-Home coverage and high performance, low-latency solutions any 30+ orbital positions, as well as the entire global Ka-band (DTH) neighbourhoods where on land, at sea and in the air spectrum in equatorial MEO • Largest portfolio of premium linear content, distributing • Partnerships with major governments as well as the world’s • End-to-end, managed services capabilities to deliver ‘best- around 3,000 HD and Ultra HD TV channels with most largest telcos, MNOs, aeronautical service providers, cruise in-class’ customer experiences, underpinned by high level attractive combination of economics and service reliability lines and Cloud companies of expertise across multiple disciplines • Trusted partner to the world’s leading broadcaster, video • Seamlessly integrating, automation and standardising SES’ • Strong cash flow generation and visibility, high profitability platform operators and content owners with strong neigh satellite network with telco and Cloud ecosystems as the and strong balance sheet credentials ensuring access to bourhoods in Europe, Americas, Asia and Africa only satellite operator with MEF 2.0 CE certification SES POSITIONING capital markets at attractive cost of capital • Modernising satellite offering with new products such as • Leveraging vast and intelligent, Cloud-enabled global net SES 360, In Sync and Video-on-Demand solutions to pro work to drive universal inclusion and deliver critical com vided integrated IP / Linear delivery munications infrastructure that make a difference ANNUAL REPORT 2019 REPORT ANNUAL SES 28 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SHIFTING CONSUMER HABITS IN MEDIA SES Global TV Homes Reach G04 CONTENT CONSUMPTION IN MILLION 366 Total media consumption is on the rise and expected to grow from 351 355 7 hours in 2013 to more than eight hours a day by 2021. According to 312 317 325 Zenith2, Television will remain the world’s favourite medium, account ing for 33% of all media consumption in 2021, down from 35% in 2019.
The proliferation of TV can also be seen in the rise of the total num ber of TV homes globally to over 1.8 billion in 2019 and the expected future growth up to almost 2 billion by 20233.
Changing consumer viewing behaviour and demand for content any where, anytime and on any device is influencing the traditional linear TV broadcasting industry model. 201 201 201 201 201 2019
While linear broadcast TV continues to be the most important and SES Reach Source: SES Satellite Monitor 2019: Africa, Asia-Pacific, and Europe, B2B surveys among cable and IPTV profitable revenue source for broadcasters, the uptake of on-demand- headends in North and Latin America, pay-TV operators’ figures, SES analyses and estimates centric video consumption changes the focus towards over-the-top (OTT) delivery of content. Global Revenues Expectations from Video Distribution G05 This is expected to impact satellite operator revenues with NSR pro US$ BILLIONS jecting that revenue from video distribution will be $5.5 billion in 2024, 1.1 compared with $7.2 billion in 2019. 1.1 1.0 1.0 0.9 0.9 2.9 2.8 2.8 Nevertheless, the amount of content available via satellite has 2.7 2.6 2.6 remained on a constantly high level: In 2019, more than 43,000 TV channels worldwide have been broadcast via satellite4, allowing satellite’s customers to benefit from its broadcast efficiencies and 3.2 reach. Demand for high picture quality remained on the rise with more 3.1 3.1 3.0 2.9 2.9 than 1,000 HD and UHD channels having been added over the course of the year—a trend which is expected to continue going forward.
2019 2020 2021 2022 202 202
ANNUAL REPORT 2019 REPORT ANNUAL 2 Zenith, June 2019 3 Dataxis
SES 4 Lyngsat Distribution Direct to Home Contribution & Occasional Use Source: NSR, June 2019 29 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
HD TV Channels Broadcast by Satellite 6 G06 CLOUD ADOPTION AND EXPONENTIAL And lastly governments and TElcos increasingly rely on satellite re GROWTH IN DEMAND FOR FIXED AND MOBILE silience during times of natural disasters and other catastrophes. CONNECTIVITY SOLUTIONS 19,403 This increasing demand is driven by end-customers’ usage patterns 18,150 16,790 Connectivity demand is expected to grow across all industries and having changed from voice- to more and more application-based 15,377 geographies: global internet traffic is forecasted to grow 3.7 times communication in various shapes and forms as well as the innovation 14,005 from 2017 to 2022, a CAGR of 26%5. push regarding Cloud- and IoT-related solutions. 12,758 End-user bandwidth requirement are increasing due to increased reliance As terrestrial networks have limits in reach, costs and timing, and on Cloud based applications for business and personal use. thanks to the technological push towards a more productive satellite infrastructure, satellite communications providers were able to repo Another development has been the increased enablement of mobility sition their investments towards new growth segments such as mobil plattforms with broadband connectivity in the air and at sea for com ity (especially aero and maritime), fixed data (rural inclusion and cell ercial, civil, defense pruposes. For example in recent years, commer backhaul) and government (ISR, e-inclusion, disaster recovery). cial aero broadband has been the single largest driver of growth 2019 2020 2021 2022 202 202 across the sector. The major growth will be driven by other applications powered by Cloud: Mobility, Fixed Data, and Government. Source: Euroconsult, September 2019 Governments are increasingly subsidising universal access programs which have a stimulating effect on demand for satellite based back haul, trunking and rural VSAT solutions. Ultra HD Channels Broadcast by Satellite 6 G07
766 Global IP Traffic by Region T01
CAGR IP TRAFFIC, 2017-2022 2017 2018 2019 2020 2021 2022 (2017-2022) 584 By Geography Asia Pacific 43 59 80 105 136 173 32 % 424 North America 42 52 63 77 92 108 21 % Western Europe 18 22 27 33 41 50 22 % 295 Central and Eastern Europe 8 10 12 15 20 25 26 % 201 Middle East and Africa 4 5 7 10 15 21 41 % 142 Latin America 7 9 11 13 16 19 21 % Total (Exabyte per Month)
ANNUAL REPORT 2019 REPORT ANNUAL 2019 2020 2021 2022 202 202 Total IP traffic 122 156 201 254 319 396 26 %
SES Source: Cisco, VNI 2018 5 Cisco, Visual Networking Index (VNI), Global IP Traffic Forecast, 2017–2022 Source: Euroconsult, September 2019 6 Euroconsult, September 2019 30 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
MOBILITY CONNECTIVITY SOLUTIONS With more than 30 million passengers having embarked on a cruise FIXED DATA SOLUTIONS voyage in 2019 the cruise industry is booming. In 2019, 18 new luxury The demand for connectivity everywhere and at any time drives vessels left the shipyard raising the total amount of cruise ships to While future growth is expected to be driven by Cloud adoption, IoT— mobility applications mainly in the aero and maritime sector. 2729. Connectivity solutions have become mandatory to satisfy pas by 2025, IoT connections are expected to amount to 25 billion11— 2019 sengers’ “like-home” connectivity expectations, leading to strong has seen an expansion in mobile backhaul (3G / 4G) and the prolifera The number of connected aircrafts has continued to grow in 2019 to demand for high-performance satellite capacity. The next growth tion of Wi-Fi Hotspots for social / rural inclusion programs. With com almost 9,000 commercial planes globally7. Besides this growth in driver is likely to be the usage of aircraft data and analytics to improve mercial 5G services having started to gain traction in developed econ penetration, the global in-flight Connectivity (IFC) market will con operational performance. omies and Cloud service providers having developed compatible edge tinue to be driven by the growth in active passenger aircrafts from computing services, satellite solutions are more and more being rec around 24,000 in 2019 to over 47,000 in 20388. While North America Overall, the potential for connectivity solutions becomes clear when ognized as essential for integrating terrestrial with space applications continued to be the most developed IFC market, the majority of looking at the current numbers of mobile vehicles: according to NSR10, and therefore combining the advantages of both solutions. connectivity demand growth is expected to come from Asia-Pacific. there are already almost 500,000 global commercial aircraft and ves sels active in 2019.
Aeronautical SatCom Addressable Market by Airframe G08 NUMBER OF AIRCRAFTS 121,831 117,020 112,341 107,851 103,855 95,255 98,124 91,070 87,070 79,489 83,228
29,154 29,957 26,808 27,576 28,358 24,588 25,314 26,054 22,486 23,170 23,868 24,278 25,190 26,102 27,014 27,926 18,805 19,717 20,629 21,541 22,453 23,365 5,559 5,862 6,165 6,468 6,771 7,073 7,376 7,679 7,982 8,285 8,588 201 2019 2020 2021 2022 202 202 202 202 202 202
Widebody Narrowbody Business Jets General Aviation & Rotor Wing Source: NSR 7 Valour Consultancy, In-Flight Connectivity Update, Q3 2019 8 Boeing, Commercial Market Outlook 2019-2038
ANNUAL REPORT 2019 REPORT ANNUAL 9 Cruise Lines International Association (CLIA), 2019 Cruise Trends & Industry Outlook 10 NSR, 2019
SES 11 Ericsson, Mobility Report, November 2019 31 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
GOVERNMENT SOLUTIONS
With a rise in geopolitical risks and uncertainty, many Governments Further, the rise of peace-keeping missions, increased Cloud adoption have been significantly augmenting their defense expenditures.12 The as well as the expansion of e-inclusion programs (e-health, e-learning, largest procurer of commercial satellite communication solutions— etc.) were further drivers of satellite communication demand. the US Department of Defense (DoD)—increased its budget by over 12% compared to 2018 to a total of $686bn in 2019.13 Just as the use of mobile platforms, including UAVs, ships and land vehicles, continued to rise, so did the need for reliable and secure, fiber-like connectivity.
Capacity Demand by Force Type G09 GBPS 350
300
250
200
150
100
50
0 2019 2020 2021 2022 202 202 202 202 202 202
12 The World Bank Group Maritime Air Land Source: NSR 13 US DoD FY 2019 Budget Request ANNUAL REPORT 2019 REPORT ANNUAL SES 32 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
BUSINESS MODEL
2 OUR VALUE PROPOSITION 3 We leverage a vast and intelligent network that spans satellite and ground VALUE CREATION infrastructure—enabling you to connect more people in more places with FOR STAKEHOLDERS 1 content that enriches their personal stories with entertainment, knowledge and opportunity. PURPOSE AND With clear strategic priorities OPPORTUNITIES TWO MARKET-LEADING BUSINESSES and focus on execution, we aim to create value for all stakeholders.
We contribute to making the SES VIDEO SES NETWORKS CUSTOMERS & world and society a better place. Unparalleled reach and economics Integrating unparalleled connectivity PARTNERS We believe in the need for underpinning large, profitable and solutions into the mainstream global Our customers are part of our family. content connectivity solutions resilient video neighbourhoods network ecosystem, driving SES’ growth We are passionate about customer everywhere. experience and focused on customer Focus on: reinforcing and driving value Focus on: combining unique high success OUR PURPOSE & through our core neighbourhoods, throughput, low latency global network ›› see page 38 and 40 AMBITIONS modernising satellite in IP delivery and with end-to-end managed solutions and We do the EXTRAORDINARY maximising operational efficiency Cloud-enabled capabilities EMPLOYEES in space to deliver AMAZING ›› see page 38 ›› see page 40 We want to unleash the full potential experiences EVERYWHERE and passion of the entire SES family, on Earth STRONG FUNDAMENTAL COMMON CAPABILITIES making SES a great place to work ›› see page 22 ›› see page 51 SPECTRUM & REGULATORY OUR FINANCING & PROFITABILITY Unique access to multiple frequencies Strong balance and liquidity manage- SOCIETY OUR We want to raise up the human expe- (C-, Ku- and Ka-band) globally, including ment, underpinned by high margins, cash OPPORTUNITIES rience, ensure everyone is connected entire equatorial MEO Ka-band spectrum flow generation and investment grade We see significant demand for to the world’s content and use our ›› see page 34 status ›› see page 43 content connectivity solutions business to do good where satellite can play a major role ›› see page 47 ›› see page 27 OUR INNOVATION & TECHNOLOGY OUR CULTURE & PEOPLE Open innovation approach with leading Diverse global business and talent base industrial partners to drive productivity, who are experts in their fields with a SHAREHOLDERS We strive to deliver an attractive flexibility and reduce cost ›› see page 34 growth mindset and drive to make a combination of sustained capital difference ›› see page 51 growth and income return while making a difference ANNUAL REPORT 2019 REPORT ANNUAL ›› see page 16 SES 33 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SES GLOBAL NETWORK SES Fleet in Multiple Orbits as of December 2019 G10
In Orbit GEO OUR NETWORK APPROACH In Orbit MEO * Inclined orbit The network enables us to be a leader in global content connectivity solutions. The core building blocks of the network architecture are an integrated satellite and ground infrastructure.
GLOBAL SPACE NETWORK TODAY
SES’ space segment operates within two orbits: Geostationary Orbit (GEO) and Medium Earth Orbit (MEO). This provides a unique com bination of truly global coverage and high throughput, low latency capabilities.
Today, our SES GEO fleet comprises more than 50 satellites operat ing with a combination of C-, Ku-, Ka- and X-band frequencies.
The majority have ‘wide-beam’ payloads where a small number of beams are used to cover a large geographic area.
Three of SES’ satellites (SES-12, SES-14 and SES-15) have a hybrid Additionally, we have satellites combination of wide-beam and high throughput payloads—a large flying secondary missions: ASTRA 1D*,ASTRA 1F, ASTRA 1G*, number of smaller beams capable of deploying more bandwidth and — Geostationary Orbit (36,000km from Earth) ASTRA 2A*,ASTRA 2B*, ASTRA 2C*, throughput to a defined area. — Medium Earth Orbit (8,000km from Earth) ASTRA 2D*, ASTRA 3A*, NSS-6
SES also operates O3b, a constellation of 20 high throughput Ka-band satellites in MEO equatorial orbit. The key advantages of MEO satel lites are the capability to scale capacity globally simply by adding GLOBAL GROUND NETWORK TODAY more satellites into the MEO orbit and the ability to serve applications which require low latency which GEO cannot. SES’ first mover advan Our ground infrastructure ensures that customers can gain access to We at SES bring satellite connectivity to the customer by providing tage at MEO gives priority access to Ka-band for the equatorial MEO SES’ satellite fleet and capacity from anywhere in the world. To do seamless access to the satellite fleet: the extensive fibre-based net constellation. this, SES combines global network with local presence. work transports content from any city in the world to any other place in the world via one of SES-owned or partner teleports and the six This is done by either 30 SES-owned or partner teleports, a compre main SES POPs. ANNUAL REPORT 2019 REPORT ANNUAL hensive fibre-based terrestrial network and numerous points of pres
SES ence (POP). 34 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SES Ground Network G11 AS OF DECEMBER 2019 ANNUAL REPORT 2019 REPORT ANNUAL SES 35 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
OUR NETWORK VISION FUTURE LAUNCHES The constellation has improved economics with lower cost-per-bit and cheaper ground equipment, including small, fast and easy-to- Our ambition is to take satellite mainstream, having it as a seamless • SES-17 will be launched in 2021. It is an HTS satellite covering the install O3b mPOWER Customer Edge Terminals. integrated extension to the world’s terrestrial telco networks and Americas and Atlantic Ocean region and tailored to serve mobility making SES a global Cloud connectivity platform. To accomplish that, and fixed data applications. Thales Avionics has committed to a The new satellites will seamlessly integrate into the current O3b and standardisation, integration and automation are critical. long-term commercial agreement for service over the Americas GEO fleet, including SES-17 and SES partners are investing in sig and Atlantic Ocean. nificant ground infrastructure innovations. Viasat, and Istotropic Standardisation: • In 2021, we will launch our next generation MEO constellation with Systems are developing application-specific prototypes that converge • SES is the first and only satellite operator to have been certified seven O3b mPOWER satellites manufactured by Boeing. These storage, computing and routing resources with software intelligence with the Metro Ethernet Forum (MEF) 2.0 standard, used to rate satellites will have unprecedented capability to redistribute band to introduce a new concept for the network endpoint: a small, fast and the latency of terrestrial networks and making satellite networks width and coverage in orbit to meet the dynamic demands of our easy-to-install O3b mPOWER Customer Edge Terminal. comparable to terrestrial standards. customers and fulfill our ambition.
Integration: O3b mPOWER • Further, Software defined networking (SDN) techniques play a key role in uniquely equipping SES Networks’ ecosystem with the O3b mPOWER will combine innovative space and ground technology flexibility to shape, moderate, route, and switch satellite connec advancements, as well as software intelligence and will enable SES tivity in a truly dynamic manner. Networks to deliver fully managed services to meet exponentially • Adding application visibility, analytics and intelligence also enables accelerating demand in the dynamic fixed data, mobility and govern smart utilisation of our MEO and GEO satellites alongside terres ment markets. The investment also unlocks important capital efficien trial based infrastructure. cies from SES’ unique GEO-MEO network architecture with synergies equivalent to two replacement GEO satellites. Automation: • SES is working with Amdocs to host an Open Networking Automation Each O3b mPOWER satellite can dynamically generate up to 5,000 Platform (ONAP) within an Microsoft Azure domain. This is a first fully shapeable and steerable beams, which can be combined into for the satellite industry leveraging standards developed within the fewer, more capable beams as needed giving maximum flexibility to Telco and Cloud industries, bring the same automation and pro tailor services to the customer requirement. grammability to Satellite. Each satellite has a throughput 10 times greater than those in the first-generation constellation, delivering a multiple terabits-per-sec ond, low latency constellation, which is highly scalable by simply add ing satellites to the MEO orbit.
Further, the constellation will cover an area of nearly 400 million square kilometres representing 80 per cent of the Earth’s surface. ANNUAL REPORT 2019 REPORT ANNUAL SES 36 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
OPERATIONAL REVIEW REVENUE BY BUSINESS UNIT
OPERATIONAL REVIEW
Revenue by Business Unit T02 2019 underlying revenue of EUR 1,944.1 million was 3.5% lower at constant FX, compared with the prior year. Total group revenue Change (%) of EUR 1,983.9 million included periodic and other revenue of EUR MILLION 2019 2018 Reported Constant FX EUR 39.8 million (2018: EUR 47.1 million). Video 1,213.4 1,306.3 -7.1% -8.5% Underlying 1,210.0 1,292.1 -6.4% -7.8% Periodic 3.4 14.2 n/m n/m Networks 762.0 695.7 +9.5% +4.7% Underlying 734.1 671.1 +9.4% +4.5% Periodic 27.9 24.6 n/m n/m Sub-total 1,975.4 2,002.0 -1.3% -3.8% Underlying 1,944.1 1,963.2 -1.0% -3.5% Periodic 31.3 38.8 n/m n/m Other 8.5 8.3 n/m n/m
Group Total 1,983.9 2,010.3 -1.3% -3.8%
“Underlying” revenue represents the core business of capacity sales, as well as associated services and equipment. This revenue may be impacted by changes in launch schedule and satellite health status. “Periodic” revenue separates revenues that are not directly related to or would distort the underlying business trends on a quarterly basis. Periodic reve nue includes: the outright sale of transponders or transponder equivalents; accelerated revenue from hosted payloads during construction; termination fees; insurance proceeds; certain interim satellite missions and other such items when material. “Other” includes revenue not directly applicable to Video or Networks ANNUAL REPORT 2019 REPORT ANNUAL SES 37 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SES VIDEO PERFORMANCE Underlying revenue (excluding periodic) of EUR 1,210.0 million was As expected, North American revenue decreased, primarily driven by 7.8% lower than the prior year at constant FX reflecting lower distri the reduction in wholesale business related to a specific satellite used SES Video delivers high-quality media content to more than 366 mil bution (-7.9%) and services (-7.2%) revenue, including from U.S. whole by a single customer while the ongoing switch-off of Standard lion households worldwide across 40 video neighbourhoods. sale and reduced exposure to low-margin services contracts. Definition TV channels also contributed to the lower (year-on-year) revenue development in this region. As of 31 December 2019, the SES fleet distributes over 8,300 TV chan 2019 Video Revenue by Segment G12 nels to global audiences including nearly 3,000 High Definition (HD) In Europe, the effect of modest volume reductions on certain long- and Ultra HD (UHD) TV channels. 15% term renewals secured in late 2018 and the reversal of some short- MX1 term capacity contracts that ended during the second half of 2018 Globally, this is done via Direct-to-Home (DTH) platforms, Direct-to- contributed to lower (year-on-year) revenue. Cable (DTC) neighbourhoods, digital terrestrial, and Internet Protocol 10% Television (IPTV) networks. HD+ While trading conditions remained challenging, SES has made pro gress in its International business with new customer contracts SES Video delivers a full suite of innovative end-to-end value-added 50% signed, albeit not yet offsetting the impact of challenges in specific services for both linear and non-linear distribution on prem and now Europe markets. via Cloud. Video Services >15% Every day, SES Video manages playout for more than 525 channels, International Underlying revenue was 7.2% lower (constant FX) in 2019 compared and delivers more than 8,400 hours of online video streaming, includ with the prior year. ing over 620 hours of premium sports and live events. <10% HD+ has been suffering from somewhat lower hardware sales, as the North America Those connectivity solutions and services are delivered to a broad business is shifting towards a software-based model in partnership range of global customers. with leading TV set manufacturers such as Panasonic and Samsung, which led to HD+ revenue being lower (year-on-year) while the num Key customers include Sky, Dish, Canal+, BBC, Pro7 Group, ARD, ZDF ber of paying subscribers remained stable. IMG, Telefonica, Amazon, Discovery, Disney, Fox, Turner, to name At 31 December 2019, SES carried a total of 8,324 TV channels to some. viewers around the world including 2,956 channels in High Definition In MX1, the discontinuation of certain low-margin services led to lower (up 6% year-on-year) and 48 commercial Ultra High Definition chan overall (year-on-year) revenue and held back the positive contribu 2019 PERFORMANCE nels (up 17% year-on-year). 68% of the total TV channels carried on tion from other, more value-added products and services. This the SES fleet are now broadcast in MPEG-4 with an additional 4% in included the Sports & Events business where SES Video continued For the year ended 31 December 2019, SES Video generated revenue HEVC. to build commercial momentum with major sports rights holders, as of EUR 1,213.4 million including periodic revenue of EUR 3.4 million. well as SES’ OU Flex solution. Video Distribution 2019 underlying revenue was 7.9% lower (constant FX) than the prior year. Since the beginning of September 2019, MX1 has been combined with SES’ video infrastructure teams to create a single market-facing entity ANNUAL REPORT 2019 REPORT ANNUAL and improved value proposition for customers. SES 38 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
ENHANCING CUSTOMER EXPERIENCE AND 3. Transforming media delivery with Cloud—SES to Deliver Premium 5. Bringing TV platforms to Ethiopia—Ethiosat platform to deliver DRIVING CUSTOMER SUCCESS EVERYWHERE Broadcast-Grade Cloud Service for Media Delivery on Microsoft over 30 HD channels to Ethiopian viewers SES Press Release Azure SES Press Release Notwithstanding the challenging ›› market environment, SES Video “By migrating the most popular Ethiopian TV channels to a new concluded some important contracts and was able to offer new prod “Broadcasters and media companies need solutions to deliver location on SES’s satellite, we’ve created an Ethiopian-only TV ucts and solutions to customers. high-quality video services globally with maximum flexibility, offering, that also delivers a variety of channels in HD, a first in scalability and reliability. We look forward to working with SES Ethiopia.” Some examples as follows: to deliver these new solutions on Azure.” Amman Fissehazion, 1. Daring to Dream—Global distribution of the Eurovision 2019 song Tad Brockway, Chairman of the AEB contest SES Blog Corporate Vice President of Microsoft
“EBU entrusted MX1 to take care of the global distribution of the 6. Offering customer oriented solutions—SES to offer Free-to-Air three Eurovision 2019 live broadcasts, as well as the aggrega 4. Sharing in the best sports experiences—Nex Parabola and SES satellite solutions to Brazil’s Local TV audiences tion of the voting summaries coming in from the 41 separate bring UEFA Champions League and Europa League football SES Press Release participating countries across Europe and Australia.” matches live in HD to viewers across Indonesia SES Press Release “TV Cultura, among other channels and content owners, have been testing SES’s newest Ku-band uplink and are reaping the ben 2. Bringing content to life—RCN Launches New Ultra HD 4K “Having recently secured the exclusive broadcast rights for the efits of getting to market faster and being able to broadcast to Channels with SES SES Press Release UEFA Champions League and Europa League in Indonesia, we millions of viewers at a lower investment cost.” want to bring the best European football entertainment to as “Not only will customers enjoy a crystal-clear picture for sports, many fans as possible.” shows and movies, but also will be able to use the 4K technol ogy with their favorite streaming apps—providing a seamless Junus Koswara, user experience.” President of Nex Parabola
Chris Fenger, COO of RCN ANNUAL REPORT 2019 REPORT ANNUAL SES 39 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SES NETWORKS PERFORMANCE Network customers vary depending on the data application. For Government mobility applications customer examples are Thales, Panasonic, Gogo, 2019 underlying revenue grew by 4.9% (year-on-year) at constant FX SES Networks provides managed global connectivity and data service Global Eagle. In contrast, in the cruise industry SES directly partners on the back of a second successive year of growth in both U.S. and solutions for a wide range of fixed and mobile applications. By com with the cruise companies encompassing Carnival, Royal Carribean, Global Government revenue. bining a global GEO / MEO network and end-to-end solutions capa Genting, MSC. Examples for government customers are the Luxem bility, SES Networks enables major Government, Fixed Data (Telco, bourg State, US DoD, Nasa, ESA, Hughes. Besides, SES Telco custom Revenue from the U.S. Government continued to grow, supported by MNO and Cloud) and Mobility (Aeronautical and Maritime) customers ers examples are Orange, Teleglobal and Telefonica. MEO and a solid base of GEO-enabled network solutions, albeit with to extend their network reach across the entire world. some delays experienced which impacted the timing of revenues. 2019 PERFORMANCE SES is the first, and only, satellite operator to have been certified with Growth across the Global Government portfolio was driven by the the Metro Ethernet Forum (MEF) 2.0 standard, used to rate the For the year ended 31 December 2019, SES Networks generated revenue expansion in managed services for government-funded connectivity latency of terrestrial networks. By adopting these practices and of EUR 762.0 million including periodic revenue of EUR 27.9 million. projects, humanitarian operations, as well as strong execution in standards of the terrestrial network system, SES is making it easier institutional projects. for customers to integrate satellite-based networks into a global eco Underlying revenue (excluding periodic) of EUR 734.1 million was system. 4.5% higher than the prior year. Fixed Data 2019 underlying revenue was 4.2% lower (year-on-year) at constant FX. This also includes the integration of software-defined networking 2019 Networks Revenue by Segment G13 (SDN) capabilities and the flexibility and control that come with it Growth in the Americas, and notably Latin America, was supported opening new opportunities such as the optimisation of the traffic by new and incremental managed services to tier one telecommuni between MEO or GEO over an intelligent multi-orbit network. >25% cations companies and Mobile Networks Operators to deploy 4G net Mobility works and government-funded rural WiFi projects, as well as ongoing Further, SES is working with Amdocs to host an Open Networking 40% MEO adoption provided to leading service providers in the Energy Automation Platform (ONAP) within an Microsoft Azure domain. This Government segment. is a first for the satellite industry leveraging standards developed within the Telco and Cloud industries, bring the same automation and The business also saw growth in Asia, especially in the second half programmability to Satellite. of 2019 following the successful deployment of broadband access and mobile connectivity services to rural communities in support of government-funded universal service obligation projects and in partnership with telecommunications companies. <35% Fixed Data Lower revenue from wholesale capacity in Europe, the Middle East and Africa, and services in Asia Pacific, led to overall Fixed Data revenue being lower than 2018 which benefited from an exceptionally strong fourth quarter and has yet to be offset by the timing of cus tomer upgrades and new business secured during 2019 but not yet ANNUAL REPORT 2019 REPORT ANNUAL contributing a full year of revenue. SES 40 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Mobility Some examples of important customer successes are as follows: 4. Driving the Cloud era everywhere—Certified Partner to Microsoft Underlying revenue grew by 16.6% (year-on-year) at constant FX with Azure. Co-creating customer opportunities that leverage Microsoft double-digit growth in both Aeronautical and Maritime. 1. At home and the office connectivity in the air—Long-standing Azure Express Route over satellite for Cloud connectivity and partnership with Gogo in support of the growth of airline inter intelligent edge applications, such as IoT. SES Press Release Aeronautical once again delivered strong growth driven by the steady net consumption over the Americas increase in the fill rate of SES-15 and SES-14, capturing the significant “This new collaboration between SES and Microsoft Azure demand for bandwidth and services from Aero Service Providers sup “Our agreements with SES secure scalable bandwidth necessary Express Route further enables us to bring Azure to any business porting airlines operating flights across North America and Latin for Gogo 2Ku to continue to provide the best passenger expe or government site.” America; the expansion of SES’ Ka-based aero network; the first con rience in flight.” tribution from managed connectivity services delivered to the busi Ross Ortega ness aviation segment and the restoration of services on behalf of Oakleigh Thorne, Partner, Product Manager of Azure Intelsat as part of the restoration agreement between the two com President & CEO of Gogo panies that was activated during Q2 2019. 5 Connecting rural areas in Columbia - INRED partners with SES 2. Empowering next-gen passenger experiences—the next level of Networks to enable 1,000 free community wifi hotspots to con In Maritime, the cruise segment continued to lead growth with the ex floating smart cities and Cloud-enabled customer experiences nect Colombia SES Press Release pansion of agreements with existing cruise customers and contribu with O3b mPOWER’s flexibility and performance. tions from new cruise operators signed. As at 31 December 2019, SES SES Press Release “By working together with SES Networks, we were able to quickly is now supporting four of the top five global cruise operators, repre and cost-effectively expand our data and Internet services via senting significant vessel expansion potential and highlighting SES’ “MedallionNet has significantly elevated the cruise experience satellite throughout the Colombian territory, reducing the digital market-leadership in this important and valuable part of the market. for our guests and crew, but more importantly stimulated the divide that still separates cities from the countryside. This pro creation of leading-edge, Cloud-based edge compute models ject will allow end users in 20 Colombian departments to have that were previously considered impossible.” high speed Internet access, even in those areas that have been ENHANCING CUSTOMER EXPERIENCE AND historically underserved or tough-to-reach.” DRIVING CUSTOMER SUCCESS EVERYWHERE John Padgett Chief Experience Officer of Carnival Corporation Jhon Jairo Ureña With underlying growth of 4.5% in 2019, and more than 20% in the last CEO at INRED two years, SES Networks continues to expand on the back of growth 3. New era for connecting the unconnected—Orange will be the in the Aeronautical, Cruise and Government segments while, in Fixed first global telecom operator to integrate satellite-based revolu Data, SES signed and deployed several important connectivity networks tionary terabit-scale O3b mPOWER communications system in that will contribute to future growth in 2020 and beyond. its network, to support the growing demand for connectivity in Africa SES Press Release
“This longstanding partnership fully aligns with our mission of building smarter and open networks to bridge the digital divide in Africa, and to increase the speed and geographic reach of our ANNUAL REPORT 2019 REPORT ANNUAL network.” SES Jean-Luc Vuillemin, EVP of Orange 41 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
FINANCIAL REVIEW Depreciation, Amortisation and Operating Profit T04 Profit Attributable to SES Shareholders T05 Change Change Revenue, Operating Expenses and EBITDA T03 EUR MILLION 2019 2018 Change (%) EUR MILLION 2019 2018 Change (%) Change Depreciation and impairment Net interest expense and other (176.9) (180.3) +3.4 +1.9% EUR MILLION 2019 2018 Change (%) expense (696.9) (719.0) +22.1 +3.1% Capitalised interest 8.2 28.9 (20.7) n / m Revenue 1,983.9 2,010.3 (26.4) -1.3% Amortisation and impairment Net foreign exchange gains / (loss) 2.8 5.1 (2.3) n / m expense (154.3) (145.4) (8.9) -6.1% Revenue (constant FX) 1,983.9 2,062.1 (78.2) -3.8% Net financing costs (165.9) (146.3) (19.6) -13.4% Depreciation, impairment and amortisation expense (851.2) (864.4) +13.2 +1.5% Profit before tax 199.5 244.8 (45.3) -18.5% Operating expenses (767.3) (754.8) (12.5) -1.7% Depreciation, impairment and Operating expenses (constant FX) (767.3) (775.3) 8.0 +1.0% amortisation expense (constant FX) (851.2) (891.1) +39.9 +4.5% Income tax benefit / (expense) 76.5 41.9 +34.6 n/m Profit after tax 276.0 286.7 (10.7) -3.7% EBITDA 1,216.6 1,255.5 (38.9) -3.1% Operating profit 365.4 391.1 (25.7) -6.6% EBITDA (constant FX) 1,216.6 1,286.8 (70.2) -5.5% Operating profit (constant FX) 365.4 395.7 (30.3) -7.6% Non-controlling interests 20.2 5.7 +14.5 n/m Profit attributable to SES shareholders 296.2 292.4 +3.8 +1.3% Reported revenue was EUR 26.4 million below the prior year and Depreciation, impairment and amortisation expense decreased included the benefit of the stronger U.S. Dollar in 2019. At constant by EUR 39.9 million compared with the prior year (at constant FX) Coupon on hybrid (perpetual) bond, FX, revenue decreased by EUR 78.2 million (or 3.8%) with lower Video and included EUR 96.8 million of impairment expenses (compared net of tax (48.8) (48.1) (0.7) -1.5% revenue partly offset by a second successive year of growth in Net with EUR 156.4 million in 2018), comprising EUR 32.8 million relating Adjusted profit attributable to SES shareholders 247.4 244.3 +3.1 +1.3% works. to satellites and EUR 64.0 million relating to MX1, as a result of SES’ more prudent financial outlook. Basic earnings per Class A share Operating expenses were EUR 12.5 million higher as reported (or (in EUR) 0.54 0.54 EUR 8.0 million lower at constant FX) and included a restructuring Operating profit represented an operating profit margin of 18.4% charge of EUR 20.6 million as part of the company’s ongoing optimi (2018: 19.5%), or 19.5% excluding the restructuring charge as noted sation initiatives (2018: EUR 11.1 million). Excluding the restructuring above. Net financing costs were EUR 19.6 million higher than the prior year charge, and at constant FX, operating expenses were 2.3% lower than with lower interest expenses and favourable foreign exchange move the prior year. ments more than offset by lower capitalised interest, as recent space and ground investments are now in service and ramping up. EBITDA represented an EBITDA margin of 61.3% (2018: 62.5%), or 62.4% excluding the restructuring charge noted above. The year-on-year comparison of income tax benefit and non-con- trolling interests is affected by the impairment expenses, as noted above, which also had an impact on non-controlling interests. The 2019 income tax included the recognition of certain investment tax credits.
ANNUAL REPORT 2019 REPORT ANNUAL Net profit attributable to SES shareholders of EUR 296.2 million
SES represented basic earnings per share of EUR 0.54 after deducting the assumed coupon (net of tax) for the group’s hybrid (perpetual) bonds. 42 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Free Cash Flow before Financing Activities T06 Net Debt to EBITDA Ratio T07 In October 2019, SES successfully launched and priced a new 8-year EUR 500 million Euro Bond which bears a coupon of 0.875% per Change 31 Dec. 31 Dec. Change EUR MILLION 2019 2018 Change (%) EUR MILLION 2019 2018 Change (%) annum. The transaction was oversubscribed by five times, allowing SES to strengthen its liquidity profile ahead of a EUR 650 million Net cash generated by Borrowings1 4,428.3 4,384.9 (43.4) -1.0% senior debt maturity in March 2020 where the interest rate is 4.625% operating activities 1,134.1 1,191.3 (57.2) -4.8% Cash and cash equivalents (1,155.3) (909.1) +246.2 +27.1% Net cash absorbed by and issued a new bond with the lowest coupon in the company’s Net debt 3,273.0 3,475.8 +202.8 +5.8% investing activities (307.8) (320.8) +13.0 +4.1% history.
Free cash flow before financing activities 826.3 870.5 (44.2) -5.1% 3.22 3.29 Net debt to EBITDA (rating agency)2 times times DIVIDEND Weighted average interest cost3 3.63% 3.62% For FY 2019, the SES Board of Directors proposed a dividend of 7.0 Net cash generated by operating activities was lower than the Weighted average debt maturity years 7.0 years EUR 0.40 per A-share and EUR 0.16 per B-share (as compared with prior year which benefitted from some periodic inflows in 2018. The EUR 0.80 per A-share and EUR 0.32 per B-share for FY 2018 that was group’s Cash Conversion Ratio (being the ratio of net cash generated 1 As presented using IFRS recognition principles, where hybrid (perpetual) paid on 30 April 2019). bonds are treated as 100% equity from operating activities to EBITDA) was 93.2% compared with 94.9% 2 Rating agency methodology treats the hybrid bonds as 50% debt and 50% equity. in 2018. Net debt to EBITDA represents the ratio of net debt plus 50% of the group’s The proposed dividend underscores the continued commitment to EUR 1.3 billion of hybrid bonds, divided by the last 12 months’ EBITDA 3 Excluding loan origination costs, commitment fees and hybrid bonds maintaining SES’ Investment Grade credit rating, providing an This was partly offset by lower net cash absorbed by investing (average coupon of 5.05%) attractive return to shareholders while supporting the short-term activities, resulting in an overall decrease of EUR 44.2 million (or investment peak in SES’ fast-growing, highly differentiated Networks 5.1%) in free cash flow before financing activities compared with Compared with 31 December 2018, net debt was EUR 202.8 million business. the prior year. The ratio of free cash flow before financing activities (or 5.8%) lower reflecting the combination of a small increase in gross to revenue was 41.7% in 2019 compared with 43.3% in 2018. borrowings and higher balance of cash and cash equivalents. This dividend, will be paid to shareholders on 23 April 2020.
In line with SES’ commitment to Investment Grade Credit status, the net debt to EBITDA ratio was 3.22 times at 31 December 2019, slightly lower than the 3.29 times as at 31 December 2018.
In June 2019, SES completed the renewal of the group’s EUR 1.2 bil lion Committed Revolving Credit Facility. The margin for the new five-year facility is 40 basis points (for a Baa2/BBB rating) above EURIBOR and is five basis points inside the pricing of the former syndicated and committed credit facility closed in January 2014. ANNUAL REPORT 2019 REPORT ANNUAL SES 43 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
FULL YEAR 2020 FINANCIAL OUTLOOK FY 2020 expected EBITDA of EUR 1,150-1,210 million excludes a restructuring charge of approximately EUR 40 million as part of SES’ The financial outlook assumes a EUR/USD exchange rate of Simplify and Amplify programme of initiatives, announced on 2 March EUR 1 = USD 1.15, nominal launch schedule and satellite health. 2020. The expected benefits of this programme include an annual improvement in EBITDA ramping to EUR 40-50 million from FY 2021 Full Year 2019 Financial Outlook T08 as compared with SES’ provisional business plan. This outlook also excludes any impact from C-Band. 2019 2019 (as EUR MILLION 2020 (restated) reported) Net debt to EBITDA is expected to be at or below 3.3 times at the end Average EUR/USD exchange rate 1.15 1.15 1.12 of 2020, consistent with SES’ commitment to investment grade status. Group revenue1 1,920–2,000 1,961 1,984 Video revenue 1,110–1,150 1,208 1,213 Expected capital expenditure (representing the net cash absorbed Networks revenue 800–840 745 762 by the group’s investing activities excluding acquisitions and financial 2 EBITDA 1,150–1,210 1,223 1,237 investments) is expected to be EUR 360 million in 2020, EUR 1,350 mil 1 Group revenue including Other revenue of approximately EUR 10 million lion in 2021 (including the launch of SES-17 and O3b mPOWER satel (2019: EUR 8.5 million) lites 1-7), EUR 450 million in 2022, EUR 450 million in 2023 and EUR 2 EBITDA excluding restructuring charge of approximately EUR 40 million (2019: EUR 20.6 million) and excluding any impact from C-Band 250 million in 2024.
SES expects FY 2020 group revenue of EUR 1,920-2,000 million, incor porating a more prudent view of revenue development in Video and a somewhat lower trajectory of growth exiting 2019 in our Networks segments. ANNUAL REPORT 2019 REPORT ANNUAL SES 44 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CORPORATE SES Approach on Corporate Responsibility and our Impacts G14 RESPONSIBILITY OUR AMBITIONS IMPACTS KEY SESG MATTERS • We believe in content and • Bridging the digital divide • Disaster recovery missions connectivity everywhere • Connecting people • Connecting people to video • We provide Cloud-enabled, satellite- • E-inclusion (e-health / e-learning) and data At SES, we believe in the need for content connectivity solutions S based Intelligent connectivity • Disaster recovery everywhere and that providing access to the world’s information in ›› see page 5 and 6 fast and reliable way is essential to providing everyone on Earth with the opportunities to grow and, in turn, to make a difference as well. • We are future-proof, powered by • Minimising carbon footprint • Carbon Disclosure Project (CDP) sustained growth and innovation • Responsible resource management • Debris management OUR APPROACH & IMPACT • We provide Cloud-enabled, satellite- • Sustainable space missions • Management of resource E based intelligent connectivity consumption on earth ›› see page 16, 17, 18, 19 Sustainability and Corporate Responsibility is an important compo nent of the SES purpose and ambitions. The aim of our corporate activities is to add value in the short, medium and long-term. This • SES is a great place to work • Customer success and satisfaction • Customer satisfaction score reflects corporate success, as well as competitiveness and future • We are passionate about • Employee engagement • Supply chain standards viability and does not only depend on the company itself but also on customer experience and focused • Attractive employer • Human Capital development S on customer success • Health and safety improvements • Development policies the industry environment, relationships with stakeholders and the ›› see page 10, 11, 14, 15 usage of different resources.
We aspire to conduct all of our business activities in a sustainable and • We are here to make a difference • Reputation • Group wide Code of Conduct ›› see page 12, 13 responsible way. As part of this, we identify factors in four key areas— • Transparency and ethical business behaviour • Human rights • Corporate citizenship: behaviour and • Anti-bribery / anti-corruption Societal, Environmental, Social and Governance (SESG)—and our G governance measures activities in these areas support the group’s purpose and ambitions. • Safeguarding compliance • Data security / cybersecurity In doing so, creating lasting value and impact for all stakeholders.
We support the principles of the United Nations Sustainable Develop ment Goals (SDGs). Our areas of action and the sustainability- related activities support the following Sustainable Development • SDG 10: Reduce inequalities • SDG 4: Quality Education Goals in particular: We bring content and connectivity to people and societies which Our connectivity solutions offer a wide variety of education and were previously not connected to the world’s information, so they trainings that enable people and societies to learn and develop at can contribute to a more equal world with more equal opportunities. anytime, anywhere in the world.
• SDG 3: Good Health and Wellbeing • SDG 8: Decent Work and Economic Growth ANNUAL REPORT 2019 REPORT ANNUAL Giving access to connectivity means bridging the information gap By improving access to education and remote health solutions and
SES between countries or societies which benefits e-health, e-inclusion investments into regions, countries and businesses while respect and improve the wellbeing of people. 45 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
ing and upholding human rights in our own businesses and our Non-financial Statement Disclosures in the relevant Chapters of the Report T09 supply chain, we support the implementation of decent work as Reporting Requirement Policies Relevant Information defined by SDG 8. Business Model • Business Model ›› More Information • Strategic priorities ›› More Information • SDG 9: Industry Innovation and Infrastructure Environmental matters • Environmental Policy • Corporate responsibility ›› More Information Through our innovation in Cloud, automation and virtualisation and • Fleet Management and Lifecycle Management • Ambitions and purpose ›› More Information the expected benefits for connectivity in poor and remote areas, • Carbon Disclosure Project we demonstrate the long-term potential of digital innovation. • Waste Management Policy Social matters • Procurement Policy • Corporate responsibility ›› More Information POLICIES TO MINIMISE RISK • Giving back initiatives • Ambitions and purpose ›› More Information • Disaster relief programmes • Governance section ›› More Information To minimise risks across the business, achieve our objectives to create • Customer Heartbeat (satisfaction, voice) and Link perception studies sustainable value for stakeholders, we have identified potential risk Employee matters • Health and Safety Policy • Corporate responsibility ›› More Information areas relating to the Societal, Environmental, Social and Governance • Flexible Working Policy • Ambitions and purpose ›› More Information business activities. This is part of our Risk and Internal Control system, • Social Fund Policy ›› More Information. • Training and development • Diversity Balancing risks and optimising value creation for our stakeholders Human Rights • Vendor Policy / Supply Chain Policy • Ambitions and purpose ›› More Information must go hand in hand with the right policies and business principles • Code of Conduct • Governance section ›› More Information ›› More Information in place. Therefore, SES is implementing governance and policy • Human Rights Policy • Corporate Governance / Chairman report structures tackling the four areas of SES’ Corporate Responsibility Anti-corruption and bribery • Supplier Code of Conduct • Ambitions and purpose ›› More Information • Group Wide Code of Conduct • Corporate Governance ›› More Information approach (Societal, Environmental, Social and Governance). • Whistleblowing Hotline • Compliance Guidelines The following chapters give a fair and transparent overview of SES Principal risks and impact from • Shift in consumer trends • Principal risks and uncertainties, ›› More Information activities in these four areas related to value creation for our stake business operations • Customer dissatisfaction • Governance section on managing risks ›› More Information holders while minimising risks. • Liquidity risks • Corporate responsibility ›› More Information • Regulatory risks NON-FINANCIAL STATEMENT Non-financial key performance • Employee turnover, diversity ratio indicators • Employee training • Technical reach and TV channel count The following information is provided in compliance with the Non- • Net Promotor Score Financial Reporting Directive requirements. The table below sets out • Service availability
where the relevant information can be found in this Annual Report. • CO2 emissions ANNUAL REPORT 2019 REPORT ANNUAL SES 46 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
aster-hit areas. Each country has unique challenges and opportunities around the move towards digital and we are at the forefront of this transformation.
ENGAGING IN HUMANITARIAN AND DISASTER RELIEF
Over recent years, SES has engaged in various missions to improve humanitarian situations:
Emergency.lu missions emergency.lu is a mobile, satellite based, telecommunications plat form, created to re-establish communication (internet, phone) after a disaster, to support the coordination efforts of humanitarian organ isations in the field and to contribute to saving lives during humani tarian emergencies. It is a Public-Private-Partnership between the Luxembourg Government and three Luxembourg companies (SES, HITEC Luxembourg and Luxembourg Air Ambulance).
In 2019, emergency.lu has been deployed in 15 locations: • UNICEF in RoSS: Link • WFP in Nigeria: Link • UNHCR in Niger: Link • UNHCR in Chad: Link SOCIETAL MATTERS SES has implemented several policies and guidelines with the aim • WFP in CAR: Link to bring stakeholder value to customers, societies and to make a • UNICEF in Venezuela: Link We understand that we are part of something bigger and that we want difference. • UNHCR in Venezuela: Link to contribute and make a difference to the society and the people • Mozambique (Cyclone Idai): Link around us. DRIVING GLOBAL DIGITAL EQUALITY • Bahamas (Hurricane Dorian): Link
Since 1985, SES has been doing the extraordinary in space to deliver Reliable, high-speed connectivity is key to driving digitisation and Besides the ‘new’ deployments that SES achieved in 2019, amazing experiences everywhere on Earth. We provide over 1 billion boosting countries’ economies and opening opportunities for their there were also 3 missions that were up and running in 2019: people with access to entertainment, news and information content; people. With the ability to beam reliable and flexible bandwidth any • UNICEF in RoSS (active from May 2015 to June 2019) bring connectivity to remote populations; pioneer new technologies where on earth, our satellites bring access to information and learn • UNHCR in Niger (Starting July 2017, ongoing) that can drive social, environment and economic change globally; ing, improving digital inclusion. In this way, we help progress initiatives • WFP in Nigeria (Starting January 2017, ongoing) ANNUAL REPORT 2019 REPORT ANNUAL and save lives by restoring critical connectivity following natural across geographical barriers, bringing infrastructure to fragile econ
SES disasters. omies and isolated communities, or aiding humanitarian efforts in dis Since the initiation of the project in 2012, emergency covered 27 mis sions with 69 deployments. 47 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Disaster Response and recovery response In 2019, SES has translated this belief into concrete actions and For example, in Nigeria we have leveraged our satellite technology Developed two disaster response and recovery products to better deployed access to information in the following developing countries: and infrastructure to run e-learning programmes since 2015. In part meet the needs of mission critical communications during a disaster. nership with the Nigerian Government we are implementing ICT pro The first is a ‘response’ package geared toward the first days after a Colombia jects that are bridging the digital and information gap in rural areas disaster when early communications are critical for disaster assess Together with INRED SES provides internet access to 1,000 remote and providing e-learning facilities to underserved communities. ments and meeting the immediate needs of the people on the ground. sites in Colombia, currently providing 300Mbps. Those 1,000 sites The second package is a ‘recovery’ package utilizing our O3b con were installed by 30 November 2019. GIVING BACK stellation for a longer deployment where restoration of a network or connecting an entire community is the focus. Indonesia SES’ entire team focuses on charitable work, including volunteering, TELEGLOBAL and SES provide broadband internet access and mobile charitable activities that benefit from our donation-matching pro Luxembourg initiatives—High-Performance ICT backhaul services to 150,000 sites in remote parts of Indonesia. gramme, SES social clubs, and charity projects endorsed by our Infrastructure HR Learning and Development team. These activities engage and Jakarta motivate our colleagues, who then inspire each other to give back to Supported by the Government of Luxembourg, SES devised a future- SES installed two gateways in Jakarta supporting TELEGLOBAL, ena the community where we work. proof country-wide ICT infrastructure to deliver high-speed commu bling the delivery of almost 1400 MHz in bandwidth capacity. nications to connect government entities of Burkina Faso. The inno SES matches employee donations to charitable organisations in vative solution integrates wireless terrestrial communications and Brazil cluding the Red Cross, the Red Crescent, Oxfam, Unicef, Médecins available fibre-optic networks into a satellite-enabled infrastructure, We are currently also working on a project providing internet access Sans Frontières, and Telecoms Sans Frontières. powered by Medium Earth Orbit (MEO) capabilities. It is designed to to 700 schools in remote areas in Brazil and have started with the connect over 880 sites across the country – to improve day-to-day deployment of the first phase. In 2018, a group of SES volunteers developed SHARITY, an employee- operations for government offices and enable deployment of e-gov based charity designed to support small and tailored development ernment, e-education, e-health projects. The infrastructure is also DRIVING E-LEARNING PROGRAMMES projects around the world. In 2019, SHARITY collected over EUR 13,000 reinforced by solar energy installations. A reliable high-performance IN AFRICA and was able to bring girls back in school, help communities achieve network is also the basis for further adoption of advanced IT tools sustainability, and contribute in a small way to keep this world a bit and applications. Supporting the information, technology and com E-learning can change lives by delivering quality education to even greener. munications sectors helps improve people’s lives, enables productivity the most remote locations, everywhere on the planet. Although our and economic growth. e-learning programmes are deployed across the world, in the last few years we have focused our efforts on the African continent, where SUPPORTING THE DEPLOYMENT satellite technology is best-placed to reach rural and isolated areas. OF UNIVERSAL ACCESS We have therefore worked with governments and public institutions in Africa to encourage them to embrace satellite technology to accel We believe that everyone has the right to seek, receive and impart erate an education development programme. information. This right is an integral part of the right to freedom of expression. ANNUAL REPORT 2019 REPORT ANNUAL SES 48 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
ENVIRONMENTAL MATTERS
Although our business activities have a low environmental impact, we understand our responsibility as corporate citizen to support the urgent action to prevent climate change and to limit the increase in global temperatures.
SES environmental policy is structured around two main impact zones: space and earth.
1. Responsible satellite fleet management SES applies a responsible fleet management approach together with its satellite manufacturer to mitigate the environmental impact and to minimise space debris.
2. Minimising the environmental impact of SES sites and ground stations. SES does not operate any manufacturing sites; it has 44 offices and ground stations ›› More Information. SES applies best practices in minimising the environmental impact of these facilities. Further, SES also ensures that the amount of radiation emitted from earth stations complies with local standards in each country of operation. This is checked through annual audits by third party accredited organisa tions that specialise in the field of industrial safety (like the WHO).
Having analysed the risks of potential environmental impacts, SES concluded that there is no need to make financial provisions or guar antees in respect of environmental risks. Furthermore, there is no ongoing litigation concerning environmental issues within the Group. ANNUAL REPORT 2019 REPORT ANNUAL SES 49 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
OPPORTUNITIES FOR CLIMATE CHANGE In Operation and end-of-life: SES satellites operate in either geo (September 2009), the 2018 guidelines to DEFRA / DECC’s GHG Con MITIGATION stationary orbit (35,786 km above the Earth) or medium-earth orbit, version Factors for Company Reporting and the International Energy
(8,000 km). At end-of-life, they are re-orbited using their remaining Agency’s 2018 edition of CO2 emissions from fuel combustion and Reduction of environmental pollution on-board propellant into a graveyard orbit, approximately 200 kilo World energy balances database. Satellites receive their operating power from the sun, through solar metres beyond the geostationary orbit. In general, SES satellites do panels, outside the Earth’s atmosphere. They therefore create no car not re-enter the Earth’s atmosphere. Emissions from Scope 2, electricity consumption, represented the bon emissions during their operating lifetimes. largest component of SES’ total emissions (approximately 61%). Scope In this regard, SES follows the most stringent international standards 2 location-based emissions factors were chosen in line with the GHG Climate Change adaptation technology for re-orbiting and passivating space assets and we have one of the Protocol recommendations. For low occupancy sites, assumptions Climate change risks are not considered as principal risk ›› More best records in the industry terms of achieving a safe disposal of our were made based on average electricity, gas and travel data at the Information to SES business activities. SES can contribute substantially satellites. main office sites. A data collection questionnaire was circulated to all to climate change adaptation efforts by providing specialised tele 43 main SES global sites and a large sample of low occupancy and communications applications for aircraft emission management and MINIMISING EMISSIONS unmanned SES sites. disaster warnings and impact analysis.
Since 2008, we have officially reported the CO2 emissions of our oper In the context of the legal framework in Europe with the goal to save SPACE DEBRIS MANAGEMENT ations through participation in the Carbon Disclosure Project (CDP), energy, SES started to analyse the energy efficiency of the main facil which collects the data of all SES’ business activities and locations. ities in accordance with EN 16247. This exercise has been performed The United Nations General Assembly has recognised “that space at SES’ sites in Munich, Germany, and Betzdorf, Luxembourg. Through debris is an issue of concern to all nations”. Space debris is defined The data collection for CDP covers three scopes: these and other initiatives, we have implemented a substantial and as “all manmade objects including fragments and elements thereof, ongoing carbon reduction plan in our sites across the world. in Earth orbit or re-entering the atmosphere, that are non-functional.” • Scope 1: Direct Combustibles (gas and fuel consumption, refrigerant
leakage, car fleet) SES Group CO2 Results T10 Lifecycle analysis of satellites • Scope 2: Indirect Energy consumption (purchased electricity or heat) YEAR 2018 2017 2016 2015 2014 2013 Launch: non-reusable launch vehicles end up breaking up into thou • Scope 3: Other Emissions (business travel, commuting, waste, water sands of small fragments as they re-enter the atmosphere, and debris consumption) Scope 1 (t CO2e) 2,524 2,517 2,418 5,455 6,546 6,621
can also occur as a result of explosions during launch. SES is involved Scope 2 (t CO2e) 30,821 26,980 24,701 24,395 17,080 17,391
at the institutional and industry level in developing protocols for In 2018, the company’s activities related to operating and commer Scope 3 (t CO2e) 17,178 17,386 13,737 12,486 11,460 14,756 reducing or removing space debris. We are a founder of the Space cialising SES’ satellite fleet, as well as general administration, finance Total emissions (t CO e) 50,523 46,883 40,856 42,336 35,087 38,768 Data Association (SDA), a non-profit association of spacecraft oper and marketing generated approximately 50,523 tons of CO2 emissions 2 ators that support the controlled, reliable and efficient sharing of data worldwide, an increase of 8% compared to 2017. This increase was to enhance the safety and integrity of satellite operations. due to the growth of the company in number of employees and sites. WASTE MANAGEMENT Since 2017, SES and SpaceX have pioneered reusable rockets for The methodology used follows as closely as possible the guidelines satellite launches. This reduces space debris, allows the reuse of outlined in the Greenhouse Gas (GHG) Protocol: A Corporate Account In order to facilitate the recycling of different waste types in Betzdorf materials that would otherwise go to waste, and improves cost-effective ing and Reporting Standard (Revised Edition) and Defra (UK) Guid (Luxembourg), our Headquarters and biggest site, we separate as ANNUAL REPORT 2019 REPORT ANNUAL ness of launches. ance on How to Measure and Report your Greenhouse Gas Emissions much waste generated on site as possible. SES 50 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
We systematically collect data on waste management in compliance SOCIAL MATTERS HUMAN CAPITAL STRATEGY with the Ministry of the Environment, Climate and Sustainable Devel opment and ISO14024. We encourage each of our employees to do We understand that our activities are impacting and being impacted In order to recruit, develop and retain highly qualified staff, we are con their part to limit and eventually reduce the waste produced on our sites. by wider social stakeholder groups of customers, suppliers and tinuously striving to further improve our attractiveness as an employer. employees. Because our Leadership team, executives and managers should moti Waste management initiatives vate their employees to achieve top performance, it is crucial that we • Food Waste: We try to avoid food waste and all organic leftovers The success of SES is heavily dependent on the skills and commit equip them with outstanding leadership skills. In addition, we want to are used as combustible to fuel a Biogas plant. ment of our employees. More than 2,100 people from 81 nationalities take on social responsibility and let diversity flourish in our global • Plastic: eliminating single use plastics from our catering facilities worldwide contribute their concepts and ideas to their tasks and help company. A professional Human Capital organisation and efficient for packaging and cups. to make improvements and innovations to create amazing customer operating processes form the basis for the implementation of these • As an ecological alternative to bottled water, SES installed water experiences everywhere on the world. overarching goals, from which we have derived key areas of action. dispensers, dramatically reducing the number of consumed plastic bottles and related transport, storage and recycling efforts. Our main control tool is our Social Report, which uses key performance indicators concerning demographics, development and diversity. Betzdorf campus provides the Ministry of the Environment, Climate and Sustainable Development with a detailed report reflecting all dif ferent types of waste collection (quantities, volumes, recycling types). Additionally, SES is audited and certified by the Luxembourg SDK (SuperDrecksKescht) Label on an annual basis.
Supply chain waste minimisation Contractors, sub-contractors and suppliers are required to support SES waste reduction by implementing policies and procedures regard ing waste management.
PaperCut Initiative SES has implemented the ‘Paper Cut’ software in 2019, a print management software with the ambition to save paper waste while having a secure and easy printing experience.
As a result, SES saved in total 86,535 pages and 43,946 color pages
equalling 6.85 trees and 724.9 kg of CO2 savings. ANNUAL REPORT 2019 REPORT ANNUAL SES 51 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
HUMAN CAPITAL AMBITIONS Modern working conditions Supporting our employees in times of need Working conditions are being increasingly influenced by working To support our employees through the unexpected, the Social Fund We are passionate about employee experience and employee hours, workplaces, the work environment, the level of employee has been established for the benefit of all employees of the SES Group. success. We aim to treat employees as we want them to treat our empowerment and a state-of-the-art, growth driven management customers; empower them to take ownership of their careers; and culture. This fund is intended to provide financial support to staff members create a community where it is fun to work. and direct members of their families in case of social emergency situ The length of our employees’ workweek is generally regulated by the ations, for which staff members or members of their families cannot We strive to be future proof, powered by a strong, healthy culture. company or by a collective bargaining agreement. be held responsible. This fund is a reflection of our company values. This depends on learning and teaching, a diverse workplace where The spirit of these values defines SES as a caring organisation, that everyone feels included, and having a growth mindset. Today’s living and working conditions require working times to be has a fundamental interest in protecting the welfare of its staff mem flexibly organized in accordance with individual needs. We help bers and their families. We drive business success within SES by anticipating and meeting employees reconcile their professional and personal responsibilities the needs of the business through world-class human capital practices. and boost their flexibility and self-determination by giving them the A COMPETITIVE WORKFORCE opportunity for mobile working. ATTRACTIVENESS AS EMPLOYER Diversity management Since 2017, all employees can enter into a formal telecommuting We are committed to bringing together an SES team of diverse indi Attractive and fair compensation and benefits arrangement where they may work from another SES office, from viduals with different life experiences, different backgrounds, and from Our pay for performance compensation philosophy aims to stay ahead home or from another location for up to a max 20% of the contractually different geographies and cultures. of the market and contributes to the Company’s business strategy in agreed working time. Further options for flexible working today a fair and equitable manner. include job sharing, part-time work, phased return from leave and This approach is paramount to serving our customers today and reduction in work time. helping us decipher the world’s communication needs of tomorrow. Key Principles: By actively nurturing an inclusive company culture, and appreciating Employee welfare why it is so important to create a fair and supportive work environ • We benchmark our total compensation against local practices of We challenge our employees to play an active and informed role in ment for our people, we seek to continue attracting and retaining the other global organisations with the ICT industry as a reference point their health and benefits, providing information, programmes, bene very best talent. • Total compensation consists of the annual base pay, bonus linked fits and policies that encourage physical and mental wellbeing. To this to individual, departmental and group financial targets, benefits end, SES offers healthcare coverage for all employees in all locations, As an industry leader, SES is fully committed to increasing the number aligned with local practices as well as long-term incentives in order has a non-smoking policy for all SES offices and, depending on location, of colleagues from underrepresented groups and to creating a more to position the Company as a global employer of choice offers a range of wellness activities, healthy foods and confidential diverse SES for the future. • We are fair and consistent in all compensation & benefits related employee assistance to ensure everyone can find the balance between decisions work, family and personal pursuits. We complement this with a variety Currently 24% of SES’ workforce are women, a figure that has been of local employee events including informal get-togethers, parties, stable over the last years but that we aim to grow as part of our diver sports activities, community service projects and holiday activities. sity strategy. Women are most present in Corporate Functions (58%) but considerably less in Technology & IT (12%). Furthermore, about 30% of our employees below 30 years are female. We have observed a slight ANNUAL REPORT 2019 REPORT ANNUAL increase of women representation at executive level (13% in 2019). In
SES addition, 33% of SES’ Leadership Development Program are women. 52 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
We are determined to continue to increase the number of women in SECURING TALENT In May 2018, we teamed up with The Air League to create the first areas where they are underrepresented and to increase the number ever SES Space Scholarship. The Air League is a charitable organisa of female executives by 2020. We are applying systematic and sup In-house talent acquisition programme tion, founded in 1909, based in the United Kingdom. It provides pow portive practices in building a female talent pipeline that will sustain In 2018 we created a new global in-house Talent Acquisition function ered flying, ballooning, gliding and engineering scholarships to young long-term gender inclusion. with dedicated personnel and developed a new Strategic Plan aligned people and disabled veterans. The SES Space Scholarship is a unique to business imperatives. In 2019 we filled 412 positions 70% were filled opportunity for 17-18-year-old students, to introduce and inspire them As of end-December 2019, SES employed staff from 81 nationalities externally. 47% of the positions were filled in Europe, 40% in North towards the wide range of career opportunities in the space industry. across 41 offices. The most represented nationalities are: United America. States, Germany, Israel, Great Britain, France, Luxembourg, The Neth In promoting gender diversity in STEM, our office in Princeton, USA, erlands, Belgium and Italy. Collaborating and supporting Science, Technology, has actively supported teams in the YWCA Princeton Robotics since Engineering and Mathematics (STEM) 2016. In 2019 the two YWCA Princeton all-girls competitive robotics In addition, SES has an overall healthy age distribution with an average To secure best in class employees and to sustain innovative capabil teams visited the SES facility and presented to SES scientists and age of 43.8. 43% of our employees are aged 40 and below and 11% are ities, we believe that we must inspire the new generation towards Sci management. Female leaders at SES spoke candidly to the girls about aged 30 and below. ence, Technology, Engineering and Mathematics (STEM). Therefore, how they have managed to combine their passions and expertise to we engage in global activities in this field also using it as opportunity have strong careers in male-dominated industries. SES Employees—Geographical Distribution G15 to support and increase diversity. In October 2019, SES hosted the fifth edition of Engineering Trainee 3% SES Employees—Split according to Job Functions G16 for students aged 15-18 years from across Luxembourg. This is Latin America 1% Days Africa an initiative of Luxembourg’s engineering association and the asso 71 6% Commercial Operations ciation for young entrepreneurs, in cooperation with the Ministry of APAC 237 10% SES Video Education and Lifelong Learning. Middle East 49% Europe SES associate programme 686 276 Technology & IT To maintain our position as the world-leading satellite operator, we SES Network have established a special development programme for graduates to provide us with a pipeline of young talent. 31% 2,159 North America The SES Associate Programme is a two-year programme that invites talented young people to work in our orbit for four assignments, each lasting six months. The programme typically exposes them to all of 373 Corporate our functional areas—technology, finance, business development and Functions 518 sales—over the course of their two years. Participants have the oppor Global Services tunity to contribute to actual projects, learn from business leaders, and gain deep insight into the satellite industry. ANNUAL REPORT 2019 REPORT ANNUAL SES 53 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Learning and development HEALTH MANAGEMENT AND SAFETY By analysing the results from a quantitative, standardized survey of We offer a comprehensive portfolio of learning and professional devel AT WORK a large sample of customers with a deep-dive qualitative interview opment programmes to all our employees. analysis of a smaller group, results in a holistic picture on the percep We want to maintain our employees’ health and physical well-being tion of SES, customer challenges, expectations and improvement In 2019, we logged 9,177 participations in training for a total of 14,738 for the long term. Therefore, SES has uniform preventive healthcare potential for SES and also other important insights to steer the com hours of learning, with participation up by 12.5% from 8,160 in 2018. standards in place worldwide. pany in a customer focused way. This was facilitated by the increase in e-learning offerings. In fact, 5,491 of participations (66%) were in e-learning format. As part of our approach we develop and implement anticipatory PROCUREMENT POLICY solutions that range from the job-related ‘health check’, preventive We also managed a global Mentoring Programme last year with measures such as the flue vaccination (80 employees for the SES We take a partnership approach in regard to our suppliers and busi 70+ participants mentored by SES executives and introduced a Betzdorf population), and the ergonomic design of workstations to ness partners. For example, our open innovation approach across the monthly global Executive Lunch and Learn education session. the IT system that makes it easier to permanently reintegrate employ R&D value chain and the development of the new constellation O3b ees suffering from limitations imposed by their health. mPOWER to be launched in 2021 was the result of an open innovation Trainings in hours in 2019 model together with Boeing. SES has implemented many health policies ranging from self-instruc Hours by Category G17 tions and road safety to travel safety and also includes contractor We review the ethical behaviour of our partners as well as their com health standards. pliance with human rights and global citizenship requirements. 1,674 Technical Trainings In 2019, 9 accidents were reported for the SES Betzdorf populations, As for the purchasing policy of products and services for use in offices, 8 on the way to or from work, 1 on site. the Vendor Management Department ensures that key suppliers have 2,504 implemented policies for social and environmental issues. Requests Professional 6,886 for tenders stipulate a commitment to respect the SES ethical charter; Development CUSTOMER ‘HEARTBEAT’—CUSTOMER Compliance procurement contracts always require compliance with regulations, Training SATISFACTION, VOICE AND SCORE including prohibition of employment of non-registered personnel. 14,738 Customers are an integral part of SES defining our activities and impacting our performance. SES conducts a ‘voice of the customer’ survey once a year. This survey is based on quantitative and qualitative methods and aims to measure the following:
3,271 • CSAT (Customer Satisfaction) Leadership Training 404 • CES (Customer Effort Score) Customer Centric Trainings • NPS (Net Promotor Score = loyalty indicator) ANNUAL REPORT 2019 REPORT ANNUAL SES 54 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
GOVERNANCE MATTERS Whistleblowing System STATEMENT ON SLAVERY AND In 2019, SES introduced a whistleblowing hotline, managed by a third- HUMAN TRAFFICKING Our Corporate responsibility objectives and their management are party provider, which allows our staff to file any compliance complaints part of our corporate governance system and are also represented in in full confidence. SES is committed to ensuring that there is no modern slavery or the ›› targets and remuneration of our Directors and Executives. human trafficking in its supply chains or in any part of its business. Compliance Training SES will not support or deal with any business knowingly involved in Integrity, compliance and legal responsibility are the cornerstones of SES has implemented a comprehensive compliance training pro slavery or human trafficking. our sustainable corporate governance and serve as the basis for all gramme for staff. In 2019, overall nearly 6,000 trainings have been our actions. completed on compliance topics including cyber-security, anti-bribery & The nature of SES’ business means that the majority of SES’ suppliers corruption and sanctions & export controls. are large international companies providing complex technical ser COMPLIANCE AND CODE OF CONDUCT vices relating to the space industry through highly skilled professional RESPECTING AND UPHOLDING HUMAN RIGHTS employees. SES’ 50 largest suppliers account for approximately 80% We define compliance as trust-based, reliable and sustainable corpo of procurement spending. rate governance derived from ethical values. The Board of Directors Respect for human rights is a natural prerequisite for responsible is responsible for compliance with the law and the company’s policies business management at SES. We expect all employees to be pro- SES does not procure a material amount of goods or services in and seeks the same level of compliance from all SES subsidiaries and active in protecting human rights so that violations can be ruled out sectors that are considered to be high risk for human trafficking or employees. entirely when it comes to our company’s business activities. This is a slavery (such as agriculture or horticulture, construction, textiles, goal that is also highlighted in our Code of Conduct. catering and restaurants, domestic work, and entertainment). To manage and address compliance risk we have implemented a Com pliance Management System including a Compliance Committee and For instance, the potential risk of any child or forced labour at any of SES has created a Code of Conduct for Suppliers, which clearly out a Code of Conduct which defines guidelines for our everyday busi our locations is always considered within the scope of our audits. We lines SES’ stance towards slavery and human trafficking. SES also ness conduct, offers our employees orientation and helps them make do not see any elevated risk of child or forced labour at any of our includes in its contracts with suppliers a clause requiring the supplier the right decisions even in difficult business situations. SES locations or in our activities. SES was also not aware of any cases to comply with all laws applicable to the provision of the goods or of human rights violations within the scope of its own business activi service. SES’ contracts with its suppliers also contain a provision stat The SES Compliance Committee, composed of designated Compli ties during the reporting period. ing its suppliers cannot novate or subcontract any right or obligations ance Officers in each main corporate location, is tasked with raising to any third party without the written consent of SES. the staff’s awareness of the Code and ensures a consistent roll-out and training programme for the Code. The Committee meets regularly This statement is made pursuant to Section 54 of the Modern Slavery to discuss important topics or issues. Reflecting the company’s expan Act 2015 of the UK and sets out the steps SES has taken to ensure sion into developing markets, the composition of the Committee that slavery and human trafficking is not taking place in our supply includes representatives from SES’ offices in Asia, the Middle East chains or in any part of our business. and Latin America. ANNUAL REPORT 2019 REPORT ANNUAL SES 55 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
AVOIDING CORRUPTION AND BRIBERY SES has implemented technical and organizational security measures SUSTAINABILITY MANAGEMENT IN THE to protect networks and systems from cyber attacks. As part of con SUPPLY CHAIN SES is committed to respecting the highest ethical and legal stand tinual organisational improvement and in line with its commitment to ards, set out in our Code of Conduct, on which all our employees are strengthening cyber security, management has introduced a security The purchasing functions within SES help to ensure the supply of trained. We have identified bribery and corruption as one of the risks framework in accordance with the leading industry standard ISO 27001 materials and services at the best possible quality / cost ratio and thus that SES is facing by doing business in most countries around the in key areas. This framework is continually adapted to new threats strengthen the competitiveness of the company. SES places great world, including with governments. considering global organizational changes, security controls and prac emphasis on the efficient design of its procurement processes for tices within the group to reduce the risks of cyber attacks. achieving cost-effective purchasing results, as well as on sustainable As part of compliance training, 147 of the most exposed staff mem procurement taking into account the requirements of national laws, bers were given anti-bribery training. We are also conducting external ANTITRUST AND INSIDER TRADING POLICY EU law and the Group’s code of conduct for suppliers. due diligence on our third-party agents upon their appointment. The level of this due diligence depends on the risk assessment, which SES is committed to full compliance with competition laws. Compli Given the structure of the satellite industry and the highly technical itself is based on several elements, including the country of operation ance with competition laws is each employee’s responsibility. Employ nature of SES business, we can differentiate between the general ven and the type of business. ees that violate this Policy may be subject to disciplinary action dor policy and the dealing with major business partners and satellite including termination of employment. manufacturers or launchers. We also reduce the risk of bribery through a clear process for gifts and entertainment. The relevant policy, which like all compliance pol Given the complex nature, application and broad reach of competition Satellite manufacturer: icies is available on a dedicated intranet page, contains a dedicated laws, every SES employee is responsible for involving in-house legal As well as complying with International and Luxembourg Space Law, e-mail address that can be used to obtain guidance prior to providing counsel whenever and as soon as any issues or questions arise and our main suppliers, principally located in Europe and the U.S., are held or accepting a gift or entertainment. before taking any action that might have competition law implications. to high social responsibility standards.
HIGH STANDARDS FOR DATA PROTECTION As a public company being listed at the Luxembourg and Paris Euronext As SES is a capital-intensive company with continuing significant AND CYBERSECURITY stock exchange, SES has implemented a trading policy to ensure that investments in assets, a Policy is also required to ensure that all SES and its directors and employees and, under certain circum investments are monitored on a regular basis and that the company’s The robust management of data protection and data security is stances, their respective close family members comply with the rules assets are safeguarded. essential, in our opinion, to secure the long-term confidence of our of the securities market, transparency regulation, Market Abuse Regu stakeholders. lation and other applicable rules.
To ensure compliance with data protection laws and regulations, SES appointed a Data Protection Officer. SES has implemented a variety of measures, has reviewed, updated and enacted relevant procedures and processes, and continuously strives to comply with the General Data Protection Regulation (GDPR). ANNUAL REPORT 2019 REPORT ANNUAL SES 56 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CORPORATE GOVERNANCE
SHAREHOLDER STRUCTURE The Company has issued two classes of shares: A-shares and B-shares. Each share is entitled to one vote. However, one B-share SES has been listed on the Luxembourg Stock Exchange since 1998 carries 40% of the economic rights of an A-share. and on the Euronext Paris Stock Exchange since 2004. The ratio of A-shares to B-shares must be maintained at 2:1 as Shareholder Structure as of 3 February 2020 T11 required by the Articles of Incorporation.
1 SES Shareholders Number of Shares % Voting Shareholding % Economic Participation A-SHARES A Shares Nouvelle Santander Telecommunications S.A. 6,500,000 1.13% 1.41% A-shares are defined as shares held by private and institutional investors. Kerla S. à r.l. 2,600,000 0.45% 0.57% Other Shareholders 941,238 0.16% 0.20% The listed security is the Fiduciary Depositary Receipt (“FDR”), listed FDRs (free float) 373,416,362 64.92% 81.15% on the Luxembourg and Euronext Paris Stock Exchanges. Each of Total A Shares 383,457,600 66.67%2 83.33%2 these is backed by one A-share and has all the rights attached to that share, except the right of attending General Meetings of sharehold B Shares ers. BCEE 62,572,893 10.88% 5.44% In order to attend a General Meeting, at least one registered share SNCI 62,565,085 10.88% 5.44% must be held. Voting rights may be exercised by notifying the Fidu Etat du Grand-Duché de Luxembourg 66,590,822 11.58% 5.79% ciary (Banque et Caisse d’Epargne de l’Etat) of the voting intention. Total B Shares 191,728,800 33.33%2 16.67% B-SHARES Total Shares (Actual) 575,186,400 The State of Luxembourg holds a direct 11.58% voting interest in the Total Shares (Economic) 460,149,120 company and two indirect interests, both of 10.88%, through two state- owned banks, Banque et Caisse d’Epargne de l’Etat and Société 1 Significant shareholdings as of 3 February 2020 (Most recent available data); shareholder structure is updated regularly at link to website 2 All figures have been rounded up to the second decimal, which may result in a rounding difference of the total percentage for A and B-shares. Nationale de Crédit et d’Investissement. These shares constitute the company’s B-shares. A B-share has 40% of the economic rights of an A-share or, in case the company is dissolved, is entitiled to 40% of the net liquidation proceeds paid to A-shareholders. The B-shares are not listed on any exchange and do not back a tradable security. ANNUAL REPORT 2019 REPORT ANNUAL SES 57 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
RESTRICTIONS ON OWNERSHIP INFORMATION EXCHANGE IN REGARD TO INVESTOR RELATIONS CORPORATE GOVERNANCE No A-shareholder may hold, directly or indirectly, more than 20%, 33% SES’ dedicated Investor Relations function reports to the Chief Finan or 50% of the company’s shares unless he has obtained prior approval The company communicates transparently with its shareholders via cial Officer and works closely with the CEO. Its purpose is to develop from the meeting of shareholders in accordance with the procedure the corporate governance section of its website and through the and coordinate the group’s external financial communications and described here below. Such limit shall be calculated by taking into dedicated e-mail address [email protected]. In line with Luxem interactions with equity and debt investors, investment analysts, account all the shares held by the A-shareholder. bourg law, the company allows shareholders to receive all corporate credit rating agencies, financial journalists and other external audi documentation, including the documents for shareholder meetings, ences, to monitor stock market developments, and to provide feed A shareholder or a potential shareholder who envisages to acquire by in electronic format. back and recommendations to the SES SLT. whatever means, directly or indirectly, more than 20%, 33% or 50% of the shares of the company (a ‘demanding party’) must inform the In this context, the SES website contains a regularly updated stream The Head of Investor Relations, is responsible for the definition and Chairperson of the Board of the company of such intention. of information, such as the latest version of the company’s main gov execution of SES’ active Investor Relations programme and partici ernance documents, including the articles of incorporation, the cor pation in investor conferences and similar events. Investor Relations The Chairperson of the Board will inform the government of Luxem porate governance charter (including the charters of the various com also works closely with the Chief Legal Officer to ensure that the bourg of the envisaged acquisition. The government may oppose the mittees set up by the Board) and the separate sections on the group’s external communications are compliant with all applicable acquisition within three months from such information if it determines composition and the mission of the Board, the Board’s committees legal and regulatory requirements. that such acquisition would be against the general public interest. and the Executive Committee1. The SES Investor Relations team will be pleased to assist you with In case of no opposition from the government of Luxembourg, the The SES website also contains the SES Code of Conduct and Ethics, any questions you may have in relation to SES. Further, the SES Board shall convene an extraordinary meeting of shareholders which the SES Dealing Code, the financial calendar and any other informa IR Website contains information on all recent financials, analyst may decide at a majority provided for in article 67-1 of the law of 10 tion that may be of interest to the company’s shareholders. coverage, financial calendar and company news and is updated on a August 1915, as amended, regarding commercial companies, to regular basis. authorize the demanding party to acquire more than 20%, 33% or 50% of the shares. If the demanding party is a shareholder of the company, it may attend the general meeting and will be included in the count for the quorum but may not take part in the vote. ANNUAL REPORT 2019 REPORT ANNUAL 1 The Executive Committee is internally called the Senior Leadership Team (SLT).
SES Therefore, going forward the term SLT will be used instead of Executive Committee. 58 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CHAIRMAN’S REPORT ON CORPORATE THE ANNUAL GENERAL MEETING OF from the FDR holder, the fiduciary will vote in favour of the proposals GOVERNANCE SHAREHOLDERS submitted by the Board. One or more shareholders owning together at least 5% of the shares of SES have the right to add items on the The company follows the ‘Ten Principles of Corporate Governance’ Under Luxembourg company law, the company’s annual and / or agenda of the AGM and may deposit draft resolutions regarding items adopted by the Luxembourg Stock Exchange (its home market), extraordinary general meetings represent the entire body of share listed in the agenda or proposed to be added to the agenda. This as revised in 2017. holders of the company. They have the widest powers, and resolutions request will need to be made in writing (via mail or e-mail) and passed at such meetings are binding upon all shareholders, whether received no later than the twenty-second day preceding the AGM and SES also complies with the governance rules for companies listed in absent, abstaining from voting or voting against the resolutions. will need to include a justification or draft resolution to be adopted Paris, where the majority of the trading in SES FDRs takes place. In at the AGM. The written request must include a contact address to the instance of conflicting compliance requirements, SES follows the The meetings are presided over by the Chairperson of the Board or, which the company can confirm receipt within 48 hours from the rules of the home market. in his absence, by one of the Vice Chairperson of the Board or, in their receipt of the request. absence, by any other person appointed by the meeting. Any share SES meets all the recommendations made by the ‘Ten Principles’ holder who is recorded in the company’s shareholder register 14 busi No later than fifteen days preceding the AGM, the company will then except with regard to Recommendation 3.9, which states that the ness days before the meeting is authorised to attend and to vote at publish a revised agenda. committees created by the Board should only have advisory powers. the meeting. An A-shareholder may act at any meeting by appointing The SES Board has delegated some decision-making powers to the a proxy (who does not need to be an A-shareholder). The meeting may deliberate validly only if at least half of the A-shares Remuneration Committee. For the full details of these powers, see the and at least half of the B-shares are represented. In the event that charter of the Remuneration Committee on the SES website. After The annual general meeting (‘AGM’) is held on the first Thursday in the required quorum is not reached, the meeting will be reconvened each meeting of the Remuneration Committee, its Chairman reports April at 10:30 am CET. Each registered shareholder will receive in accordance with the form prescribed by the articles of incorpora to the Board about the latest Remuneration Committee discussions written notice of the annual general meeting, including the time of tion. It may then validly deliberate without consideration of the num and decisions. the meeting and the agenda, at least 30 days prior to the meeting. ber of represented shares. Holders of the company’s FDRs will be represented at the meeting by ORGANISATION PRINCIPLES Banque et Caisse d’Epargne de l’Etat acting as fiduciary. Each FDR The proceedings are mostly held in French, but an English translation will represent one A-share. If a holder of FDRs wishes to attend the is provided by the company. Interventions in English will be translated Created on 16 March 2001 under the name of SES GLOBAL, SES was annual general meeting of shareholders in person, that shareholder into French. A French version of the AGM minutes and the results of incorporated in Luxembourg. On 9 November 2001, SES became the will need to convert at least one FDR into an A-share. In order to the shareholders’ votes will be published on the SES website within parent company of SES ASTRA, originally created in 1985. A copy of facilitate the attendance of the meeting by FDR holders, the company 15 days after the annual general meeting. SES’ articles of incorporation, in its latest version, is available in the will pay the applicable charge for a conversion of up to 10,000 FDRs corporate governance section of the company’s website. for a short period prior to the annual general meeting. With the exception of the procedure described above regarding when ever an A-shareholder intends to hold more than 20%, 33% or 50%, Notice of the meeting and of the proposed agenda will also be pub all the resolutions of the meeting are adopted by a simple majority lished in the international press. The fiduciary will circulate the draft vote except if otherwise provided for by Luxembourg company law. resolutions to both international clearing systems, Clearstream and Euroclear, allowing FDR holders to give their voting instructions to In 2019, the AGM was hold on 4 April. The AGM was attended by the fiduciary in time for the meeting. At the same time, the draft 98.79% of the company’s shareholders, excluding the 5,486,094 FDRs ANNUAL REPORT 2019 REPORT ANNUAL resolutions will be made available on the company’s and on the fidu held by the company. The detailed results of the shareholders’ votes
SES ciary’s website. Unless the fiduciary has received specific instructions are available on the company’s website. 59 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
BOARD OF DIRECTORS & COMMITTEES
The Board of Directors is responsible for:
• Defining the company’s strategic objectives as well as its overall corporate plan; • Approval, upon proposal from the Senior Leadership Team the annual consolidated accounts of the company and the appropria tion of results, the group’s medium-term business plan, the con solidated annual budget of the company and the management report to be submitted to the meeting of shareholders; and • Approval of major investments and responsible vis-à-vis share holders and third parties for the management of the company, which it delegates to the Senior Leadership Team (SLT) in accord ance with the company’s internal regulations.
As of 31 December 2019, the Board was comprised of 13 members of which 6 were considered independent.
In September 2019, the Board agreed to limit the maximum board tenure to 12 years. Therefore, from the AGM 2020 onwards, the Board will be compromised of 12 members of which 8 are considered inde pendent.
From left to right: Back row: François Tesch, Katrin Wehr-Seiter, Serge Allegrezza, Françoise Thoma, Kaj-Erik Relander, Romain Bausch Front row: Paul Konsbruck, Tsega Gebreyes, Ramu Potarazu, Anne-Catherine Ries
ANNUAL REPORT 2019 REPORT ANNUAL Not pictured:
SES Victor Casier, Hadelin de Liedekerke Beaufort, Marc Serres 60 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
MEMBERS OF THE BOARD Anne-Catherine Ries Victor Casier AS OF 31 DECEMBER 2019 (Vice-Chairperson of the Board and Chairperson of the • Director since 7th of April 2016. Nomination Committee) • Member of the Executive Committee of Sofina S.A. and a board Romain Bausch • Director since 1 January 2015. member of various companies within Sofina’s portfolio, including (Chairman of the Board) • First Advisor to the Prime Minister and Minister for Media and Veepee, Drylock Technologies and Wynd. • Director since 4th of April 2013. Telecommunications in Luxembourg being in charge of media, • Prior to joining, he worked for Roland Berger Strategy Consultants, • Following a career in the Luxembourg civil service (Ministry of telecom and digital policy, and Member of the Board of Directors Transwide Ltd and Banco Urquijo Finance) where he occupied key positions in the banking, media of POST Luxembourg. • Holds an MBA from the University in Chicago, a Master in Business and telecommunications sectors including a five-year term as a • She holds a law degree from the Université de Paris II and the Engineering (Ingénieur de Gestion) from the Université Catholique Director and Vice Chairman of SES, Mr. Bausch has been President University of Oxford and a postgraduate LL.M degree with honours de Louvain and a certificate from the INSEAD International Directors and CEO of the Company from May 1995 to April 2014. from the London School of Economics, where she specialised in Programme (IDP). • Chairman of the Board of Directors of SES and a Director of SES Telecommunications, Information Technology and European • Mr Casier is a Belgian national. He is an independent director. ASTRA. Competition Law. • Member of the Boards of Directors of Aperam, Banque Raiffeisen • After starting her professional career in a law firm in Paris, she Hadelin de Liedekerke Beaufort Société Coopérative, Compagnie Financière La Luxembourgeoise joined the Permanent Representation of Luxembourg to the EU • Director since 17th of April 2000; will leave the board of directors and the Luxembourg Future Fund, as well as the Chairman of the in Brussels. at the AGM in 2020 CNFP (Conseil National des Finances Publiques) of Luxembourg. • Over the last 15 years, her focus has been on attracting and • Director of Santander Telecommunications and director of other • Graduated with a degree in economics from the University of Nancy developing tech companies in Luxembourg. private companies with interests in various fields such as financial also holding an honorary doctorate from the Sacred Heart University • Mrs Ries is a Luxembourg and French national. She is not an and real estate developments. in Luxembourg. independent director because she represents an important share • Graduated from the Ecole Hôtelière de Lausanne. • Mr. Bausch is a Luxembourg national. He is an independent holder. • Mr de Liedekerke Beaufort is a French national. He is not an inde director. pendent director because he has been a director for more than Serge Allegrezza 12 years. Tsega Gebreyes • Director since 11th of February 2010. (Vice-Chairperson of the Board) • Since 2013, he is the Director General of Statec, the Luxembourg Paul Konsbruck • Director since 4th of April 2013. Institute for Statistics and Economic Studies, • Director since 13th of June 2019. • Founding Director of Satya Capital Limited and Director of Sonae. • He was Conseiller de Gouvernement 1ère classe at the Ministry • Chief of Staff to the Prime Minister and Minister for Media and • Previously, she served as Chief Business Development and Strategy of Economics, responsible for internal market policy, and is the Communications in Luxembourg. Officer of Celtel International BV and Senior Advisor to Zain and Chairman of the Observatory for Competitiveness. • Director of ENCEVO SA and is the government commissioner to was Founding Partner of the New Africa Opportunity Fund, LLP • Chairman of the Board of Directors of POST Luxembourg and of CLT-UFA / RTL Luxembourg. working with Mc Kinsey and Citicorp. the Board of LuxTrust i.n.c and former president of the Conseil • After starting his professional career as Journalist and News • Senior Advisor to TPG Growth. Economique et Social. Presenter at RTL, he became Editor in Chief at Eldoradio. • Graduated with a double major in Economics and International • Prior, he was a part-time lecturer at the IAE / University of Nancy • In 2014, he entered the public service as communications adviser Studies from Rhodes College and an M.B.A. from Harvard Business 2, has a Master in economics and a PhD. in applied economics. to the Luxembourg government and was named Chief of Staff and School. • Mr Allegrezza is a Luxembourg national. He is not an independent First Government Councillor at the Ministry of State on 1 January 2016. ANNUAL REPORT 2019 REPORT ANNUAL • Mrs Gebreyes is an Ethiopian national. She is an independent director because he represents an important shareholder.
SES director. 61 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
• Holds a master’s degree in Literature and Linguistics from the • Graduated from the Helsinki School of Economics with an MSC Françoise Thoma University of Heidelberg, and participated in the Senior Executive in Economics and also holds an MBA from the Helsinki School of (Chairperson of the Remuneration Committee) Fellow Programme at the Harvard Kennedy School. Economics having completed part of it at the Wharton School, • Director since 16th of June 2016. • Mr. Konsbruck is a Luxembourg national. He is not an independent University of Pennsylvania (USA), and studied also for a PhD at the • President and Chief Executive Officer of Banque et Caisse director because he represents an important shareholder. Wharton School and the Aalto University, Helsinki. d’Epargne de l’Etat, and a member of the Boards of Directors of • Mr Relander is a Finnish national. He is an independent director. Cargolux International Airlines S.A. Luxair S.A., the Luxembourg Ramu Potarazu Stock Exchange and of Enovos Luxembourg S.A. • Director since 20th of February 2014. Marc Serres • She was a member of the Luxembourg Council of State from • CEO of Binary Fountain and Founder and former CEO of Vubiquity. • Director since 13th of June 2019. 2000-2015 and holds a PhD in Law from the Université de Paris II • 15 years of experience in various positions at Intelsat (1991-2006): • CEO of the Luxembourg Space Agency and Vice-Chairman of the Panthéon-Assas and an LL.M. from Harvard Law School. He became Intelsat’s Vice President of Operations and CIO in 1996, Council of the European Space Agency and a Member of the Inter • Ms Thoma is a Luxembourg national. She is not an independent Vice President, Commercial Restructuring in 2000, President of national Academy of Astronautics. director because she represents an important shareholder. Intelsat Global Service Corporation in 2001 and from 2002 to 2006 • Previously, served as Director of Space Affairs at the Ministry of he was President and Chief Operating Officer of Intelsat Ltd. the Economy and as coordinator of the relations with the European Katrin Wehr-Seiter • Graduated with a BS in Computer Science and in Mathematics from Space Agency at the Ministry of Higher Education and Research. (Chairperson of the Audit and Risk Committee) the Oklahoma Christian University also holding a MSc in Electrical • Prior to working for the Luxembourg Government, Mr Serres held • Director since 1st of January 2015. Engineering from the John Hopkins University and member of the several engineering positions at Hitec SA. • Managing Director of BIP Investment Partners SA, Managing Stanford Executive Program. • He is an electrical engineer and holds a PhD in optoelectronics Director / Partner of BIP Capital Partners SA and director of • Mr Potarazu is a US national. He is an independent director. from the Université Catholique de Louvain. Bellevue Group and several non-listed corporations. • Mr Serres is a Luxembourg national. He is not an independent • Prior to joining BIP, she served as a Principal at global investment Kaj-Erik Relander director because he represents an important shareholder. firm Permira and worked also as an independent strategy consultant • Director since 6th of April 2017. as well as a Senior Advisor to international private equity group • Senior Independent Advisor of Mubadala Development Company. François Tesch Bridgepoint. • Chairman of the Investment Committee at the private equity fund • Director since 15th of April 1999; will leave the board of directors • She started her professional career at Siemens AG where she held Apis.pe and a board director of Starzplay Arabia and Emirates at the AGM in 2020 various positions in strategy consulting and engineering. Integrated Telecommunications Company PJSC in Dubai. • Executive Chairman of Luxempart S.A. and Chairman of the Board • Holds an MBA from INSEAD and an MSc in Mechanical Engineering • Prior to joining Sonera Corporation where he held several manage of Foyer S.A., of Wealins S.A., and of Financière de Tubize S.A, and from the Technical University of Chemnitz. ment positions, including the position of CEO, he used to work for Vice-Chairman of CapitalatWork Foyer Group. • Mrs Wehr-Seiter is a German national. She is an independent director. the Finnish National Fund for Research and Development. He left • Graduated with a degree in economics from the Faculté d’Aix en Sonera in 2001 to join Accel Partners, a private equity and venture Provence and holds an M.B.A. from INSEAD (Institut Européen capital group before joining the Emirates Investment Authority in d’Administration des Affaires). 2009 where he was a member of its Investment and Management • Mr Tesch is a Luxembourg national. He is not an independent Committees. director because he has been a director for more than 12 years. ANNUAL REPORT 2019 REPORT ANNUAL SES 62 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Frank Esser MISSION AND COMPOSITION In accordance with internal regulations adopted by the Board, at least • Director since 11 February 2020 one-third of the board members must be independent directors. A • Vice Chair of Swisscom and Director of Interxion Holding At the annual general meeting in April 2019, the shareholders decided board member is considered independent if he or she has no relation • Former Chairman and CEO of SFR, the leading private French Tele to reduce the Board to 14 members. Following the decision by ship of any kind with the company or management that may impact com Operator and also served as Board Member of Vivendi Group Conny Kullman to resign from his mandate in June, the Board of SES his or her judgment. • Prior to SFR, he held several managerial positions with Mannes has been composed, as of 31 December 2019, of 13 non-executive mann Group directors, four of them female. Independence for these purposes is defined as: • Holds both a PhD in Managerial Economics and an MS in Eco nomics from the University of Cologne. In accordance with the company’s articles of association, two-thirds 1. not having been an employee or officer of the company over the • He is a German national and an independent director. of the board members represent the holders of A-shares and one- previous five years; third of the board members represent the holders of B-shares. 2. not having had a material business relationship with the com Béatrice de Clermont-Tonnerre pany over the last three years; and • Proposed Director to be elected in the AGM on 2 April 2020 The mandates of the current directors will expire at the annual general 3. not representing a significant shareholder holding more than 5% • Member of the Board of Directors of Grupo Prisa and Klépierre and meeting of shareholders in April 2020, 2021 and 2022, respectively. of the voting shares directly or indirectly. Senior Advisor to Kayrros • Former Director, AI Partnerships of Google, having left Google in In the event of a vacancy on the Board, the remaining directors may, As of 31 December 2019, six of the board members are considered Q3 2019 after six years upon a proposal from the Nomination Committee and on a temporary independent: Tsega Gebreyes, Katrin Wehr-Seiter, Romain Bausch, • Prior to Google she held various positions in Group Lagardère basis, fill such a vacancy by a majority vote. In this case, the next Victor Casier, Ramu Potarazu and Kaj-Erik Relander. including Senior VP Business Development and has worked in annual general meeting of shareholders will definitively elect the new Canal Plus and Radio France Internationale director, who will complete the term of the director whose seat Five of the current directors are not considered independent as they • Holds a Master degree in Politics and Economics from the Institut became vacant. represent a significant shareholder owning more than 5% of the com d’Etudes Politiques in Paris and an MBA from ESSEC Business pany’s shares. In its September meeting, the Board decided to amend School in France. Following the resignation of Jean-Paul Zens and Jean-Paul Senninger the internal regulations and to limit the maximum tenure to 12 years, • She is a French national and would be an independent director. effective June 2019, the SES Board co-opted Paul Konsbruck and a period after which Directors could previously continue, but were Marc Serres in the same meeting. no longer considered independent. In light of the new rules, the two Peter van Bommel directors who have set on the Board for longer (François Tesch and • Proposed Director to be elected in the AGM on 2 April 2020 In its September meeting, the Board decided to amend the internal Hadelin de Liedekerke Beaufort) will leave the Board at the 2020 • Chief Financial Officer and member of the Board of Management of regulations and to limit the maximum tenure to 12 years, a period after annual general meeting. Until then, the Company does not consider ASM international and Board member of ASM Pacific Technology, which Directors could previously continue, but were no longer them to be independent. Neways Electronics International, Bernhoven Foundation and the considered independent. In light of the new rules, the two directors Amsterdam Business School (Chair of EMFC Curatorium) who have served on the Board for longer (François Tesch and Hadelin Pierre Margue, Vice President Legal and Corporate Affairs, acts as • More than 20 years of experience in electronics and semiconductor de Liedekerke Beaufort) will leave the Board at the 2020 Annual secretary of the Board of Directors. industry General Meeting. Until then, the Company does not consider them to • Spent most of his career at Philips where he joined in 1979 be independent. • Director of KPN from 2012 to 2020 ANNUAL REPORT 2019 REPORT ANNUAL • Holds an MSc in Economics from Erasmus University in Rotterdam
SES • He is a Dutch national and would be an independent director. 63 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
In the context of the Board composition, the SES Nomination Com ACTIVITIES OF THE BOARD OF DIRECTORS During 2019, the Board also decided to launch a new share buyback mittee will consider a diverse Board as adding value to the company, IN 2019 programme, implementing through the filing of a ‘notice d’information’ not limiting diversity to gender diversity, but also considering, as far on 9 April 2019 a decision taken by the shareholders during the annual as possible, professional background, experience and age diversity. The Board of Directors held six meetings in 2019, with an attendance general meeting of 4 April 2019. The 2019 programme executed on The candidates should present most of the following competencies: rate of more than 97.5% as well as one Board call. After endorsement Euronext Paris was limited to the following two objectives: (i) balanced international experience; (ii) satellite communication by the Audit and Risk Committee, the Board approved the 2018 industry knowledge; (iii) non-satellite communication industry knowl audited accounts, including the proposed dividend, as well as the 1. to operate under the framework of a liquidity contract signed edge; (iv) video and data-centric products knowledge; (v) financial financial results for the first half of 2019. During the year, and after an with Rothschild, and expertise (for Audit and Risk Committee); (vi) legal, regulatory and internal evaluation led by the Chairman at the end of 2018, the Board 2. to meet the company’s obligations under its executive share compliance expertise (for Audit and Risk Committee); (vii) HR exper used the services of an outside firm for an external review of its ownership and stock option plans. tise (for Remuneration and Nomination Committees); and (viii) expe governance with the overall objective to improve the efficiency of the rience in running a business amidst a changing business environment. Board and of its Committees. These initiatives have led to several Under this programme, the company is authorised to buy back up to adaptions of the corporate governance framework, in particular 20 million A-shares and 10 million B-shares at prices between EUR 5 RULES OF GOVERNANCE through the creation of a Strategy and Investment Committee that and EUR 25 per A-share and EUR 2 and EUR 10 per B-share. provides support to the Board and to Management on strategic The Board of Directors meets when required by the company’s busi matters and acts as a conduit for regular exchange of information The Board was regularly updated on the US C-band developments ness, and at least once per quarter. It can only validly deliberate if a between Management and the Board. As a result of the same Board and possible implications for the Company. Further noted updates on majority of the directors are present or represented. The resolutions evaluation exercise, each Board meeting now includes on its agenda the company’s risk management report and the Senior Leadership of the Board are passed by a simple majority of the votes of the vot a restricted session, without the presence of Management. Team (SLT) regularly informed the Board about the group’s activities ing directors present or represented, not considering abstentions. The and financial situation. The Board noted updates on: (i) the execution Chairman does not have a casting vote. At its first meeting of the year, the Board approved the final version of of the Strategic Plan; (ii) the 2019 Business Objectives; (iii) company’s the 2019 budget and the 2019-2023 business plan. It also reviewed the approach to ESG; (iv) the Company’s launch strategy; (v) the Group’s Any material contract that is proposed to be signed by the company Strategic Plan and was briefed on the strategic plan implementation. Business Continuity Plans; and (vi) relevant HR matters. or any of its wholly controlled operating subsidiaries with a share The Board held a Strategy Day ahead of the June Board meeting. The holder owning at least 5% of the shares of the company, directly or Board reviewed the remuneration policy and adopted the proposed At each meeting, directors receive a report on ongoing matters and indirectly, is subject to a prior authorisation by the Board. discontinuation of the existing binary vesting condition for perfor the Chairperson of the four committees set up by the Board present mance shares and its replacement by a linear ratchet table to define a report on the latest developments discussed in these respective In 2019, the sole two transaction between the company and a share the final pay-out for the three-year compounded adjusted EVA. committees. In addition, a business report is distributed to the mem holder owning at least 5% of the company’s shares directly or indirectly bers of the Board on a monthly basis. related to the Company’s investment in the Luxembourg Space fund and the renewal of the concession agreement between SES Astra (a As part of its on-going training, the Board received a presentation by direct subsidiary of SES S.A.) and the Luxembourg State. According an investment bank on the satellite industry and SES’ position in the to applicable conflict of interest rules, the relevant B-Directors did relevant markets. The Board was also briefed by outside counsel on not participate in the discussion nor in the vote of these topics. the role of a Director under Luxembourg corporate law. ANNUAL REPORT 2019 REPORT ANNUAL SES 64 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
BOARD GOVERNANCE STRUCTURE & Board Structure and Committees G18 COMMITTEES
• The Board agenda is prepared in close cooperation between the CHAIRMAN OF THE BOARD: ROMAIN BAUSCH Chairman and the CEO. The committees consist of six members, at least a third of whom are independent board members in line VICE-CHAIRPERSONS: TSEGA GEBREYES, ANNE-CATHERINE RIES with SES’ internal regulations. • The Audit and Risk Committee assists the Board in carrying out its oversight responsibilities in relation to corporate policies, risk man agement, internal control, internal and external audit and financial STRATEGY & SECRETARY OF AUDIT & RISK REMUNERATION NOMINATION INVESTMENT THE BOARD OF and regulatory reporting practices. It has an oversight function COMMITTEE COMMITTEE COMMITTEE COMMITTEE DIRECTORS and provides a link between the internal and external auditors and the Board. • The Remuneration Committee determines the remuneration of the CHAIR: CHAIR: CHAIR: STEVE COLLAR PIERRE MARGUE members of the Senior Leadership Team (SLT) and advises on the KATRIN WEHR-SEITER FRANÇOISE THOMA ANNE-CATHERINE RIES overall remuneration policies applied throughout the company. It acts as administrator of the company’s long-term equity plans. SERGE ALLEGREZZA SERGE ALLEGREZZA ROMAIN BAUSCH ROMAIN BAUSCH • The Nomination Committee identifies and nominates suitable candidates for the Board of Directors, for election by the annual VICTOR CASIER ROMAIN BAUSCH TSEGA GEBREYES RAMU POTARAZU general meeting of shareholders. Proposals are based on submis sions from shareholders for a number of candidates at least equal RAMU POTARAZU HADELIN DE KAJ-ERIK RELANDER to the number of posts to be filled for each class of shareholders. LIEDEKERKE BEAUFORT ANNE-CATHERINE RIES It also identifies and nominates suitable candidates for the Senior Leadership Team (SLT). KAJ-ERIK RELANDER TSEGA GEBREYES FRANÇOIS TESCH KAJ-ERIK RELANDER • The Strategy and Investment Committee supports Management in planning, preparing and implementing the corporate strategy and the Strategic Plan for approval by the Board as well as in the FRANÇOISE THOMA RAMU POTARAZU FRANÇOISE THOMA KATRIN WEHR-SEITER preparation of any investment or divestment decision for approval by the Board. The Strategy and Investment Committee discusses and reviews important industry and company developments as MEETINGS AND ATTENDANCE RATE IN % presented by Management and reviews with Management the implementation of strategic and investment decisions approved by 4 MEETINGS, 100% the Board. 2 ADDITIONAL CALLS, 5 MEETINGS, 96% 8 MEETINGS, 95.833% 3 MEETINGS 91.7% ANNUAL REPORT 2019 REPORT ANNUAL
SES Independent CEO 65 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Activities of the Committees in 2019 G19
THE AUDIT AND RISK COMMITTEE THE REMUNERATION COMMITTEE
• Review of the 2018 financial results before their submission to the Board and their subsequent • Matters addressed related to the determination of the bonuses and the vesting of performance approval by the shareholders at the statutory annual general meeting. shares allocated to the members of the SLT for their performance in 2018. • Review of the H1 2019 financial results of the company. Members had the opportunity to communicate • Adoption of the 2019 corporate objectives, which are used as one element in the determination of any comments they had on the company’s quarterly results through the Chair of the Audit and Risk their bonuses for 2019 as well as for the 2019 stock option grant. Committee prior to the publication of these results. • Discussions on the replacement of the current binary vesting condition of Performance Shares by • Review of the company’s statement on internal control systems prior to its inclusion in the annual a linear ratchet table to define the final pay-out for the three-year compounded adjusted EVA. The report, approved the Internal Audit plan, and received bi-annual updates on the Internal Audit proposed change was subsequently adopted by the SES Board. activities and on the follow-up of the major recommendations. It also reviewed the 2018 PwC • Oversaw the implementation of the decision under which the members of the SLT must hold at least Management letter. the equivalent of an annual salary’s worth of registered shares in the company (with the CEO of SES • Proposed to the Board and to the shareholders to appoint PwC as external auditor for 2019 and it having to hold shares of at least two years’ worth of his or her annual salary). approved its compensation. • Received bi-annual updates on risk management from the SES risk management committee and was briefed on ongoing compliance matters. • Review of WACC parameters for remuneration purposes, customer credit risk and the restructuring of the Finance team. After each meeting, the Board is briefed in writing about the work of the Audit and Risk Committee.
THE NOMINATION COMMITTEE STRATEGY AND INVESTMENT COMMITTEE
• Extensive discussion on the size and the composition of the Board. As a result of discussions held by the Board on how to improve the Company’s Corporate Governance, • Having reviewed the criteria for Board membership and the resulting changes to the Corporate the Board decided in April 2019 to create an informal advisory body of the Board to provide support Governance charter, the Nomination Committee closely worked with an outside consultant to find to the Board and to Management on strategic matters and to provide a conduit for regular exchange several new directors. of information between Management and the Board. • It also discussed the renewal of existing directors and proposed to the Board a list of candidates for election by the shareholders in April 2020 for a 1-, 2- or 3-year mandate. • Met with several candidates for the position of Chief Financial Officer and submitted proposal to the Board. • After each meeting, the Board is briefed in writing about the work of the Nomination Committee. ANNUAL REPORT 2019 REPORT ANNUAL SES 66 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SENIOR LEADERSHIP TEAM (SLT)
The SES Executive Committee is known as the Senior Leadership Team (SLT):
• It is in charge of the daily management of the group. • It functions as a collegial body. • It is mandated to prepare and plan the overall policies and strate gies of the company for approval by the Board. • It may approve intra-group transactions, irrespective of the amount, provided that they are consistent with the consolidated annual budget of the company, as well as specific transactions with third parties provided that the cost to SES does not exceed EUR 10 mil lion per transaction. • It informs the Board at its next meeting of each such transaction, it being understood that the aggregate amount for all such trans actions can at no time be higher than EUR 30 million. Members of the Senior Leadership Team (SLT) are appointed by the Board of Directors upon a proposal from the Nomination Committee.
From left to right: Back row: John Purvis (Chief Legal Officer), Ruy Pinto (Chief Technology Officer), John-Paul Hemingway (CEO SES Networks), Ferdinand Kayser (CEO SES Video), John Baughn (Chief Services Officer) Front row: Evie Roos (Chief Human Resources Officer), Steve Collar (CEO), Christophe De Hauwer (Chief Strategy and ANNUAL REPORT 2019 REPORT ANNUAL Development Officer) SES 67 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Steve Collar John-Paul Hemingway Ruy Pinto (CEO, SES Group), Chairman of the SLT (CEO, SES Networks) (Chief Technology Officer) • Appointed in April 2018. • Appointed in April 2018. • Appointed in January 2019. • Since 2017 he has been CEO of SES Networks. • Prior to that, he served as the Executive Vice President, Product, • Since 2017, he had been the Deputy Technology Officer and took • Prior to SES, he was CEO of O3b Networks, and has profound expe Marketing and Strategy of SES Networks where he led Product on the additional role of Chief Information Officer (CIO) at SES in 2018. rience in several commercial and technical roles at SES WORLD Management, Marketing, Business Development and Corporate • Between 1990 to 2016 he was working for Inmarsat where he SKIES, New Skies Satellites, Astrium and Matra Marconi Space Strategy. covered various technical and managerial roles, such as CTO and (now Airbus). • Before SES acquired O3b and formed SES Networks, he was Chief Group Chief Operations Officer (COO). • Holds a degree in Mechanical Engineering from Brunel University Marketing Officer for O3b Networks. • Prior to that he was Chairman of UKSpace, and Director and VP of in London. • Prior to that, he held a variety of senior management roles in the Space for the Association of Defence, Security and Aerospace • Mr Collar is a British national. networking industry within Ciena, Corning Cables, and Netscient. Companies (ADS) and Non-Executive Director of the Space • Holds a PhD in Optical Communications and a BSc (Hons) from Application Catapult. Ferdinand Kayser Manchester Metropolitan University, UK. • Holds a degree in Electronics Engineering and completed (CEO, SES Video) • Mr Hemingway is a British national. post-graduate studies in Digital Telecommunications Systems, • Appointed in April 2017. both from the Rio de Janeiro Catholic University (PUC-RJ). • Chairman of the Board of SES ASTRA and a member of the Board Christophe De Hauwer • Mr Pinto is a dual British and Brazilian national. of YahLive. (Chief Strategy and Development Officer) • Having joined SES in 2002 as President and Chief Executive Officer • Appointed in August 2015. John Baughn of SES ASTRA he became Chief Commercial Officer of SES in 2011. • Member of the Board of SES ASTRA. (Chief Services Officer) • Prior to SES, he has worked in senior roles in media companies • Having joined SES in 2003, he held several positions of responsi • Appointed in January 2019. such as Premiere Medien GmbH & Co. KG and CLT Multimedia. bility in the areas of Strategic Marketing, Strategic and Business • Since 2017, he had been Executive Vice President, Global Services • Holds a Master of Economics from the University of Paris 1, Planning and Corporate Development, as well as Fleet Develop at SES Networks Panthéon-Sorbonne, and has concluded specialised university ment and Yield Management. • He joined SES Networks from O3b Networks, where he led the studies in Media Law and Management of Electronic Media. • Prior to joining SES, he worked in the Strategy Consulting practice Global Services team, driving service strategy. • Mr Kayser is a Luxembourg national. of the European Telecommunication and Media Industry with • Between 2008 and 2015, he was VP Global Services at Ciena, and Arthur Andersen. has a vast Telco experience included leadership roles in Motorola • Holds an Engineering and a PhD Degree from the Université Libre • Holds an MBA from the University of Warwick. de Bruxelles. • Mr Baughn is a British national. • Mr De Hauwer is a Belgian national. ANNUAL REPORT 2019 REPORT ANNUAL SES 68 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Evie Roos RESPONSIBILITIES OF THE SENIOR (Chief Human Capital Officer) LEADERSHIP TEAM • Appointed in February 2017. • Prior she held the position of Executive Vice-President Human The SLT may approve any external credit facilities or external Resources of SES and is a member of the Board of SES ASTRA, as guarantees, pledges, mortgages and any other encumbrances of the well as an elected member of the Luxembourg Chamber of company, or any wholly-owned affiliate, for as long as the company Commerce. will not lose its investment grade rating as a result of such facility • Before joining SES, she held various management positions at or guarantee. It may approve increases of up to 5% in the capital ArcelorMittal. expenditure budget for a satellite procurement already approved by • Holds two degrees in Law and European Studies from the University the Board, it being understood that the Internal Rate of Return will of Leuven in Belgium and the Europa Institut in Saarbrücken in need to comply with certain specific thresholds defined by the Board. Germany. The SLT informs the Board at its next meeting of each such increase. • Mrs Roos is a Belgian, Luxembourg and US national. The SLT submits those measures to the Board that it deems necessary John Purvis to be taken in order to meet the purposes of the company. Prior to (Chief Legal Officer) the beginning of each fiscal year, the SLT submits to the Board a • Appointed in February 2017. consolidated budget for approval. • Having joined SES in 2001, he served as Executive Vice President & General Counsel of SES since 2007. The SLT is in charge of implementing all decisions taken by the Board • Previously, he had been a lawyer in GE Lighting and Rowe & Maw, and by the committees specially mandated by the Board. The SLT • Qualified solicitor of England & and holds a law degree from Jesus may, in the interests of the company, sub-delegate part of its powers College, Cambridge. and duties to its members acting individually or jointly. • Mr Purvis is a British national. The CEO organises the work of the SLT and coordinates the activities Martin Halliwell, previously Chief Technology Officer, became Strategic of its members, who report directly to him. In order to facilitate the Advisor to the CEO on 1 January 2019 until his retirement in May. implementation by the Board of its overall duty to supervise the affairs of the company, the CEO informs the Chairman of the Board on a In October 2019, Andrew Browne stepped down as Chief Financial regular basis of the company’s activities. The latter receives the Officer. minutes of all meetings of the SLT in due time.
In February 2020, the SES Board of Directors announced the appoint ment of Sandeep Jalan as Chief Financial Officer of SES. Sandeep, who replaces Andrew Browne following his decision to leave the com pany in October 2019, will assume his position from May 2020. ANNUAL REPORT 2019 REPORT ANNUAL SES 69 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
INTERNAL CONTROL PROCEDURES Like all control systems, internal controls cannot provide an absolute This is the foundation of the other components of internal control, guarantee that risks of misstatement, losses or human error have been providing discipline and structure. The Board has delegated the OBJECTIVES AND PRINCIPLES totally mitigated or eliminated. design, implementation and maintenance of a rigorous and effective system of internal controls to the Senior Leadership Team of SES, The Board of Directors has the overall responsibility for ensuring that CONTROL ENVIRONMENT which in turn works closely with the other levels of management in SES maintains a sound system of internal controls, including financial, establishing control policies and procedures. operational and compliance controls. Such a system is an integral part SES has adopted a robust internal control framework based on a set of of the corporate governance strategy of the company. guidelines prepared by the Committee of Sponsoring Organisations of Policies and procedures are regularly updated, as appropriate. The the Treadway Commission (‘COSO’). This framework provides reason aim is to design and implement a common set of policies and pro Internal control procedures help to ensure the proper management able assurance that the internal control objectives are being achieved; cedures that best support the organisation and can be used com of risks and provide reasonable assurance that the business objec it is also consistent with the reference framework proposed by the pany-wide. The policies and procedures apply to all employees and tives of the company can be achieved. French securities regulator, the ‘Autorité des Marchés Financiers’ (AMF). officers of the SES group, and where appropriate, to its directors. The policies and procedures take into account the specificities of The internal control procedures are defined and implemented by the The control environment is an essential element of the company’s each business unit and legal entity and are adapted where neces company to ensure the following objectives in the table below: internal control framework, as it sets the tone for the organisation. sary to their activity, size, organisation and legal and regulatory environment.
Internal Control Objectives G20 A Delegation of Authority Policy is in place and regularly updated pro viding the rules for the Internal Approval and External Execution that Compliance of actions and decisions with applicable laws, regulations, standards, internal rules and contracts are required to authorise any external commitment of the company.
A group-wide ‘Code of Conduct and Ethics’ (‘the Code’) has been Safeguarding efficiency and effectiveness of operations and the optimal use of the company’s resources in place since 2009. The Code is designed to enable all employees, officers and directors to take a consistent approach to integrity issues and to make sure that SES conducts its business in compliance with Correct implementation of the company’s internal processes, notably those to ensure the safeguarding of assets all applicable laws and regulations and observes the highest stand ards of business ethics.
Integrity and reliability of financial and operational information, both for internal and external use An SES Compliance Committee (‘the Committee’), composed of des
OBJECTIVES ignated Compliance Officers in each main corporate location, is tasked with raising the staff’s awareness of the Code and ensures a consist Ensuring that management’s instructions and directions are properly applied ent roll-out and training programme for the Code. The Committee meets regularly to discuss important topics or issues. Reflecting the company’s expansion into developing markets, the composition of the Ensuring that material risks are properly identified, assessed, mitigated and reported Committee includes representatives from SES’ offices in Asia, the ANNUAL REPORT 2019 REPORT ANNUAL Middle East and Latin America. SES 70 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SES has introduced a whistleblowing hotline, managed by a third- Risk Management Structure G21 party provider, which allows its staff to file any compliance complaints in full confidence. BOARD OF DIRECTORS (BOD) AUDIT AND RISK COMMITTEE (ARC) OVERALL RESPONSIBILITY FOR RM OVERSIGHT OF RM PROCESS SES has implemented a comprehensive compliance training pro gramme. Overall nearly 6,000 trainings have been completed by staff on various compliance topics with the major focus of 2019 trainings having been on cybersecurity, anti-bribery & corruption and sanctions SENIOR LEADERSHIP TEAM (SLT) & export controls. RESPONSIBLE FOR THE RM AT THE MANAGEMENT LEVEL
To ensure better compliance with data protection laws and regu lations, SES appointed a Data Protection Officer in 2014. SES has im plemented a variety of measures, has reviewed and updated relevant RISK MANAGEMENT GROUP procedures and processes, and continuously strives to comply with OVERALL IMPLEMENTATION OF THE RM POLICY & PROCEDURES the General Data Protection Regulation (GDPR). SES GLOBAL SES NETWORKS SERVICES VIDEO The descriptions of the main SES functions and processes are elec tronically documented. Given the many ongoing updates and changes in its processes and systems, SES is standardising its process mapping STRATEGY & RISK MANAGEMENT TEAM DEVELOPMENT INCL. RISK MANAGEMENT COORDINATOR FINANCE using a common Business Process Management software.
Another key component of the control environment is the coordina HUMAN LEGAL & CAPITAL TECHNOLOGY REGULATORY tion of risk management with internal control. Risk management and internal control systems complement each other in controlling the company’s activities.
Delegation / Monitoring Risk Report Designated Risk Representatives of key SES functions RISK MANAGEMENT
SES adopted a risk management framework based on principles pro the Risk Management Committee and consists of direct reports of The risk management policy is being reviewed and updated by the posed by COSO and ISO31000. A Risk Management Team has been the Senior Leadership Team representing key SES functions. The Risk Management Team on a regular basis, including common formed, including a Risk Management Coordinator, in order to ensure Senior Leadership Team in turn reports to the Board, which has the definitions and measures of risk management, and is shared with the the adequate reporting of the risks facing SES and an overall imple ultimate responsibility for oversight of the company’s risks and for various risk owners to ensure that the risk management policy con mentation of the risk management policy and procedures by the SES ensuring that an effective risk management system is in place. tinues to be properly implemented. Risk Management Group. The coordination of the implementation of the policy and regular preparation of risk management reports is the In 2019, the Risk Management Team performed a review of the SES Each reported risk is categorised, assessed by the risk owners and ANNUAL REPORT 2019 REPORT ANNUAL responsibility of the Risk Management Group that reports to the risk management framework and is in the process of aligning it with reviewed by the Risk Management Group. Key risk developments are
SES Senior Leadership Team. The Risk Management Group has replaced the current structure of SES, and to ensure substantive risk reporting. periodically reported to the Senior Leadership Team, the Audit and Risk Committee and the Board. 71 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
INTERNAL CONTROL ACTIVITIES • The company relies on a comprehensive system of financial infor Treasury Management mation and oversight. Strategic plans, business plans, budgets and In the area of treasury management, the following should be noted: Accounting and Financial Reporting the interim and full-year consolidated accounts of the company In the area of accounting and financial reporting, the following should are drawn up and brought to the Board for approval. The Board • The treasury function uses specific software that helps to ensure be noted: also approves all significant investments. The Board receives monthly the efficiency and control of the implementation of SES’ hedging financial reports setting out the company’s financial performance strategy for interest rate and foreign currency fluctuations. This soft • Staff involved in the company’s accounting and financial reporting in comparison to the approved budget and prior year figures. ware also aims to centralise the cash management of SES’ affiliates. are appropriately qualified, trained and are kept up-to-date with • Any material weaknesses in the system of internal controls identi • In order to ensure enhanced security and efficiency of the bank relevant changes in International Financial Reporting Standards fied by either internal or external auditors are promptly and fully payments process, the company uses a banking payments system (‘IFRS’). Appropriate accounting and financial reporting policies addressed. allowing for secured authorisation and transfer of payments from and procedures are in place, regularly reviewed and updated for • The external auditors perform a limited review of the group’s half- the SAP accounting system directly to the bank. business developments and regulatory changes. year consolidated financial statements and a full audit of the annual • A clear segregation of duties and assignment of bank mandates • Controls have been established in the processing of accounting consolidated financial statements. between members of SES management, treasury and accounting transactions to ensure appropriate authorisations for transactions, departments has been implemented. effective segregation of duties and the complete and accurate Space Related Insurance • In order to streamline the cash management process, SES has cen recording of financial information. This control framework continues In the area of space related insurance, the following should be noted: tralised the in-house bank into one hub. This in-house banking to be both extended (as more entities are brought onto the group’s system is fully integrated and managed in SAP. ERP platform) and enhanced through the implementation of addi • The vast majority of the launch and in-orbit insurance activities of • SES may use forward currency contracts to eliminate or reduce the tional workflow-based controls and validations. the group are managed through SES’ insurance and reinsurance currency exposure on single deals, such as satellite procurements, • Concerning the revenue recognition process, adequate procedures captive companies based in Luxembourg. Both companies are tailoring the maturities to each milestone payment. Such foreign and controls are in place, such as monthly reviews and data vali regulated and managed in accordance with the European Solvency II currency risk is predominantly in EUR or USD. The forward con dation procedures, to ensure the correct and timely recognition of directive and are therefore subject to strict supervision and tracts are in the same currency as the hedged item and can cover revenues. governance rules detailed in the companies’ governance manuals. up to 100% of the total value of the contract. It is the company’s • Risk-based monitoring controls are implemented for key SAP control The governance structure of the companies is comprised of both policy not to enter into forward contracts until a firm commitment configurations and transactions. companies’ Boards of Directors, three committees (Investment, is in place, and to match the terms of the hedge derivatives to those • The completeness and timely recording of financial information is Underwriting and Audit, Compliance & Risk) and four key functions of the hedged item to maximise effectiveness. ensured through regular reviews, the monitoring of specific key (Risk Management, Compliance, Actuarial and Internal Audit). • Those treasury activities with a significant potential risk, such as performance indicators, validation procedures by functional leaders • Risk retention levels authorised under launch and in-orbit insurance financial derivative transactions with external parties and hedging and, as an additional check, the process of internal and external audit. policies are approved by the SES Board. Placement of new launch activities, take place within a framework approved by the Board. • In accordance with the requirements of IFRS, SES discloses detailed insurance policies as well as the placement or renewal of the SES • A short treasury report is issued every quarter to the Board as part information on the market, credit and foreign exchange risks to fleet in-orbit insurance policy are approved by the Senior Leader of the financial reporting. which it is exposed, as well as its strategy for managing those risks. ship Team. • To further strengthen these controls, the treasury policy is regularly updated. In addition, a treasury roadmap based on SES’ strategic and business plans, is also prepared and presented to the Audit and Risk Committee. ANNUAL REPORT 2019 REPORT ANNUAL SES 72 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Tax Management The controllers are trained and certified in the execution of such Information Technology Regarding the internal controls in the area of tax management, the procedures. These procedures are periodically reviewed to ensure Regarding the internal controls in the area of information technology, following should be noted: that they are up-to-date. Satellite control software is being used the following should be noted: and fully validated electronic procedures for station-keeping and • The main principles of SES’ tax risk management are laid down in other regular operations are being applied across the entire SES fleet. • Management is committed to ensuring that SES’ data, infrastructure the SES Tax Charter. Tax positions are analysed based on the most • SES has designed crisis management systems and supporting and information technology systems are as secure as is reasonably appropriate authoritative interpretations and reported in internal infrastructure and tools in order to address satellite in-orbit anomaly practicable. Security controls, policies and procedures are in place tax technical memos or tax opinions from external tax consultancy situations at an appropriate management level. SES applies to prevent unauthorised access to premises, computer systems, firms. The tax department seeks, where possible, to achieve upfront industry-standard incident management, escalation and reporting networks and data. Policies and procedures are continuously being tax clearances with relevant local tax authorities with regard to the processes to provide effective and timely support to customers. reviewed and updated in order to ensure compliance with the GDPR. tax ramifications of main business ventures, corporate reorganisa • The Satellite Contingency and Emergency Response Process • Management is committed to enhancing information security tions and financing structures of the company. reflects the company’s current organisational structure. through the established Data Governance and Information Security • Current and deferred tax liabilities are recorded in the SES group • LuxGovSat has a highly secured Network Operation Centre (‘NOC’) Committee within SES, comprising representatives from various accounts on the basis of a key control framework that ensures full on the Betzdorf campus. applicable functions, which reviews practices, policies and proce transparency and understanding of all underlying data and recon • SES has adequate satellite control primary and backup capabilities dures in this area. ciliation between the important sources of information within the utilising the European and US-based Satellite Operations Centres • As part of continuous organisational improvements, and in line with tax and accounting departments. (‘SOCs’). A SOC was built in Brazil to control the SES-14 satellite, its commitment to strengthen information and cyber-security, • The transfer pricing documentation is continuously updated and with Betzdorf having the ability to control it. management has rolled out its information security and cyber- improved underpinning all significant cross-border inter-company • For SES Geostationary Earth Orbit (‘GEO’) located satellites, pri security framework across business units. This framework is con transactions in the company through functional and economic mary satellite operations in Europe are operated from the technical tinuously being aligned with global organisational improvements analyses including benchmarking studies. SES’ transfer pricing facility in Betzdorf and primary satellite operations in North Amer and security controls and practices within the SES group. documentation includes a master file, local files and annual ica are operated from Princeton. Both SOCs are in a position to • Electronic information is regularly backed up and copies are stored country-by-country reporting. take over the operations of the other in an emergency with the off-site. fail-over procedure being tested regularly. Satellite engineering and • SES has disaster recovery plans for its business applications. The Satellite Operations Flight Dynamics tools, applications and documentation required to regular testing of these activities confirms that SES is in a good Regarding the internal controls in the area of satellite operations, the support satellite operations are available in the Betzdorf and position to recover all mission critical back-office applications following should be noted: Princeton SOCs and Data Centres. Backup satellite operations are within its recovery time objectives. also located in Redu (Belgium) and Woodbine (US). The backup • A digital workflow process for managing information technology • SES’ Technology Department is responsible for the procurement SOCs in Redu and Woodbine are tested twice a year. development projects is in place on a ServiceNow platform. Rele of satellites and launch vehicles, the procurement and maintenance • For SES Medium Earth Orbit (‘MEO’) located satellites (O3b), vant key performance indicators are reviewed on a weekly basis; of satellite-related ground infrastructure and the administration, primary satellite operations are performed from the SOC in Betzdorf • A service asset and configuration management process and data control and operations of the satellite fleet. and backup satellite operations are performed from the SOC in base are in place • The operational procedures for satellite control and payload manage Manassas (US). ment cover manoeuvres and configuration changes required in • For SES Infrastructure Redundancy, adequate backup capabilities nominal situations as well as in the case of technical emergencies. are implemented. ANNUAL REPORT 2019 REPORT ANNUAL SES 73 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
INFORMATION AND COMMUNICATION MONITORING ACTIVITIES Internal Audit reports its observations and mitigation proposals to management and monitors the implementation of these recommen All SES’ main trading operations are included and operated on Monitoring of business policies and procedures is done in one of two dations. Regular reports are provided to the Senior Leadership Team a common SAP ERP platform, sharing common IT processes and ways: and to the Audit and Risk Committee summarising Internal Audit’s controls. conclusions regarding internal control effectiveness testing and com 1. Through continuous assessments pliance. A comprehensive SAP security policy has been defined and imple 2. Or through a specific analysis. mented. This ensures that appropriate SAP access management is in Internal Audit also regularly coordinates audit planning and exchanges place and is continually enhanced. It also leverages off the imple Continuous assessments are performed by management as routine relevant information with the company’s external auditors PwC. mented SAP Governance Risk and Compliance module, which focuses operations, built into business processes, and are performed on a real- on access and process controls. time basis, reacting to changing conditions. The proxy structure of the SES Government Solutions Inc. entity, a wholly-owned subsidiary of SES SA, in line with common practice for The operation of the SAP hosting platform continues to mature in The SES Internal Audit function performs specific analyses of the businesses serving certain segments of the US Government, imposes various areas including data privacy, data encryption and intrusion relevance of, and compliance with, company policies and internal con various restrictions on the Board and executive management in detection as annually confirmed in the Statement on Standards for trol procedures. directly supervising the maintenance of an internal control system Attestation Engagements (‘SSAE’) report provided by the hosting and imposing an internal audit structure. For further informaton ›› see company. A detailed operational handbook is maintained to safeguard The mission of the Internal Audit function is to provide independent page 78. the smooth and secure operation of the company’s SAP ERP platform. and objective assurance regarding the effectiveness and efficiency The hosting company operates a state-of-the-art backup data centre of business operations, the reliability of financial and operational The SES Internal Audit function does not perform any direct internal to ensure enhanced continuity of the SAP system operations. reporting, and the company’s compliance with legal and regulatory control reviews of this entity in line with those restrictions. However, requirements. In this context, Internal Audit is also tasked with sup these restrictions are mitigated through having agreement on a Internal communication ensures the effective circulation of informa porting management in identifying, preventing and minimising risks, required risk management and internal control framework for SES tion across the organisation and supports the implementation of inter as well as safeguarding the company’s assets. Government Solutions that is subject to evaluation and testing by a nal control and risk management by providing business and functional third-party internal audit function. objectives, instructions and information to all levels of SES. To ensure an appropriate level of independence and communication, the Internal Audit function has a direct reporting line into the Audit An adequate reporting process of activities of the third-party audit The corporate intranet and collaboration tools such as the Connect and Risk Committee and functionally reports to the CEO. function to the SES Internal Audit function and the Audit and Risk platform are instrumental in sharing information and knowledge Committee is in place. throughout the company. The activities of the Internal Audit function are executed in accord ance with an annual audit plan, which is reviewed and approved by It should be further noted that the group’s external auditor is also the Audit and Risk Committee. This plan is prepared in close cooper engaged for the audit of the financial statements of SES Government ation with the company’s Risk Management Team to dynamically link Solutions. the audit plan to risks and exposures that may affect the organisation and its operations. ANNUAL REPORT 2019 REPORT ANNUAL SES 74 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
PRINCIPAL RISKS Principles of managing risks
SES defines risk as the possibility that a potential event, condition, action or inaction will occur and adversely affect SES’ ability to achieve its business objectives.
Risks are categorized as follows:
Risk Map G22
RISKS RELATING RISKS RELATING RISKS RELATING RISKS RELATING RISKS RELATING RISKS RELATING RISKS RELATING TO LEGAL, RISKS RELATING TO PROCURE- TO SATELLITES TO INSURANCE TO CUSTOMERS TO THE SATCOMS TO STRATEGIC CORPORATE, TO FINANCE MENT MARKET DEVELOPMENTS SPECTRUM
DEPENDENCY ON IN-ORBIT INSURANCE KEY CUSTOMER LOSS COMPETITION RISK EMERGING LEGAL RISK ECONOMIC SATELLITE FAILURE(S) COVERAGE MARKET RISK DOWNTURN RISK MANUFACTURER(S) AND / OR SECONDARY CUSTOMER CREDIT TECHNOLOGY RISK SPECTRUM ACCESS SUPPLIER(S) SHORTENED INSURANCE INVESTMENT RISK RISK INVESTMENTS OPERATIONAL LIFE AVAILABILITY INHERENT IN DEPENDENCY ON INTERNATIONAL SPECTRUM CASH-FLOW RISK LAUNCH SERVICE BUSINESS COORDINATION RISK PROVIDER(S) CREDIT RATING RISK INHERENT IN SPECTRUM USE RISK LAUNCH DELAY(S) DOING BUSINESS WITH AND / OR LAUNCH THE U.S. GOVERNMENT TAX RISK FAILURE(S) REGULATORY RISK ASSET EXPORT CONTROL IMPAIRMENT RISK
LIQUIDITY RISK SANCTIONS COMPLIANCE RISK FOREIGN EXTERNAL EXCHANGE RISK THREAT RISK INTEREST RATE RISK CYBER RISK COUNTERPARTY PEOPLE-RELATED RISK CREDIT RISK ANNUAL REPORT 2019 REPORT ANNUAL UNFORESEEN HIGH IMPACT RISK SES 75 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
1. RISKS RELATING TO PROCUREMENT Launch delay(s) and / or launch failure(s) Some of SES’ satellites experiencing technical anomalies are operat SES is planning to launch the SES-17 satellite as well as seven O3b ing beyond the end of their design lives. These satellites have already Dependency on satellite manufacturer(s) and / or second- mPOWER satellites (on two launch vehicles) during 2021. The launch completed the primary missions for which they were designed and ary supplier(s) of these satellites carries a risk of delay for a variety of reasons, includ have been redeployed for secondary missions. Satellites in secondary SES is dependent on five major satellite manufacturers for the con ing the late availability of the launch service or last-minute technical missions are used for various reasons, such as developing new orbital struction of its satellites. problems arising on the satellites or the launcher. locations, safeguarding spectrum rights and providing redundant capacity for satellites in their primary missions. These satellites’ Dependency on a small number of satellite manufacturers may reduce A launch delay or failure could have a material negative effect on technical capabilities do not generally need to be fully utilised in SES’ negotiating power and access to advanced technologies (which revenue. Satellite launch and in-orbit insurance policies do not com operating their secondary missions, which potentially mitigates the may only be available to certain suppliers). It may also result in a pensate for lost revenues due to the loss of customers or for conse effects of further technical failures. higher concentration of risk; SES may incur significant delays in pro quential losses resulting from any launch delay or failure. curing new satellites in the event of prolonged problems at one of The O3b satellites operate as a constellation in a non-geostationary these satellite manufacturers. Further, the difficulties caused by any SES attempts to mitigate the risk of a launch delay interrupting exist orbit with each satellite covering a service region as it orbits the technical problems with the design of a particular model of satellite ing services by leaving adequate time margins in procurement sched equator. Because the satellites are non-geosynchronous, each satel may be multiplied if several satellites of that design are purchased. ules for replacement satellites. lite provides service to all O3b customers over each complete orbit around the Earth. Accordingly, a beam failure could affect all custom In addition, there are a limited number of second tier suppliers of cer There is always an inherent risk of launch failure, or failure of the sat ers using that beam in each region served by O3b, which could affect tain key components for communication satellites. SES may incur sig ellites during the launch and early operations phase, resulting in a all customers and require O3b to remove the satellite or beam from nificant delays in procuring new satellites in the event of prolonged reduced satellite lifetime (in case of incorrect orbit injection or satel commercial operation. This would reduce the number of beams or problems at one of these secondary suppliers. lite propulsion anomalies during transfer orbit), reduced functionality regions served by the constellation unless a spare satellite could be of the satellite or the total loss of a mission. utilised to replace the failed satellite or beam. Four of the current SES attempts to mitigate these risks relating to procurement by a con 20 satellites are used as spares to provide back-up for other satellites stant monitoring of its supplier base, maintaining multiple procurement SES attempts to mitigate the risk of launch failure in several ways, in the constellation. sources and developing relationships with new suppliers where possible. including by detailed technical risk management of each satellite and launch vehicle programme and asset insurance for each launch. SES attempts to mitigate the risk of in-orbit failure by careful vendor Dependency on launch service provider(s) selection and high quality in-orbit operations. SES’ fleet is diversified SES is currently largely dependent on Arianespace (for SES-17) and 2. RISKS RELATING TO SATELLITES by manufacturer and satellite type, which reduces the likelihood of SpaceX (for mPOWER) to launch its satellites into space. SES may widespread technical problems. The impacts of such failures on incur significant delays in launching new satellites in the event of a In-orbit failure(s) customer service and related revenues may be mitigated by an in- prolonged unavailability of one of these two launch vehicles. One or more of SES’ satellites may suffer in-orbit failures, ranging from orbit backup strategy, pursuant to which customers on an impaired a partial impairment of its commercial capabilities to a total loss of satellite may possibly be transferred to another satellite in the fleet. the asset. In the event of such a failure, SES may not be able to con In addition, SES has a restoration agreement in place with another tinue to provide service to some of its customers. satellite operator pursuant to which customers on an impaired geo stationary satellite may possibly be transferred to another satellite in A number of SES’ satellites have experienced various technical that operator’s fleet in order to protect continuity of service. For the ANNUAL REPORT 2019 REPORT ANNUAL anomalies either before or during 2019. MEO fleet it is possible to ‘pair’ satellites to carry traffic following
SES failures or, depending on the anomaly, to rebalance the customer 76 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
traffic to provide continuity of service. However, there is no guaran • nuclear reaction or radiation contamination; Insurance availability tee that these mitigations will be entirely effective, especially in the • wilful or intentional acts causing the loss or failure of satellites; Satellite insurance is a cyclical market subject to the laws of supply event of the failure of several satellites. • cyber attacks; and and demand and the space insurance market has seen a reduction of • terrorism. capacity, combined with a significant increase of insurance rates dur In-orbit insurance constitutes an additional financial mitigation ing 2019. This will likely result in increases in the amount of insurance against the risk of impairments, subject to the limitations of such The insurance policies do not provide compensation for business premiums paid by SES to cover its risks and affect its ability to obtain insurance. interruption, loss of market share, reputational damage, loss of reve the desired level of coverage going forward. nue, incidental and consequential damages and similar losses that Shortened operational life might arise from the loss of a satellite during transportation to the SES’ self-insurance programme improves its flexibility to accommo The design life of SES’ geostationary satellites is typically 15 years launch site or launch site operations, the failure of a satellite launch, date variations in insurance market conditions. and the design life of O3b’s current satellites is 12 years. In the event incorrect orbital placement or the failure of a satellite to perform of changes in the expected fuel life of the satellite, in-orbit anomalies according to specifications. In addition, SES’ in-orbit insurance only 4. RISKS RELATING TO CUSTOMERS or other technical factors, its actual life may be shorter than this. This covers losses in excess of the risk retention level selected by SES. could lead to the satellite being depreciated faster than anticipated Key customer loss and the lifetime revenue generated by the satellite being reduced, The in-orbit insurance policies may exclude coverage failures arising SES depends on a number of key customers whose loss (or non- diminishing the overall return on investment for the asset. from pre-existing defects, such as defects in solar array and battery renewal) would reduce SES’ revenues. SES’ five largest customers anomalies on some existing satellites. In addition, SES will not be fully represented 22.4% of SES’ total revenues in 2019. SES attempts to mitigate the risk of a reduced operational life by care reimbursed if the cost of a replacement satellite exceeds the sum ful vendor selection and high quality in-orbit operations. insured. As a consequence, the loss, damage or destruction of any If key customers reduce their reliance on SES by developing or satellites as a result of any of these events could result in material increasing relationships with other satellite operators, or moving to 3. RISKS RELATING TO INSURANCE increases in costs or reductions in expected revenues or both. other telecommunications solutions, and such key customers cannot be replaced on time, SES’ revenues may be impacted negatively. Insurance coverage SES has adopted a policy of limited self-insurance. Premiums relating SES’ satellites may be subject to damage or loss from events that to its satellite fleet are paid to a wholly-owned subsidiary, thus reduc It is important that SES’ main, and long-term, satellite capacity agree might not be covered by insurance policies. SES maintains 1. pre-launch ing the amount of insurance premiums paid to external insurance ments for the direct-to-home business in Europe are renewed on com insurance, 2. launch and initial in-orbit insurance, 3. in-orbit insurance companies. mercial terms similar to those reflected in the existing agreements. If and 4. third-party liability insurance for its satellites. The insurance SES would be materially unsuccessful in obtaining such renewals, policies generally contain exclusions for losses resulting from: If any event occurs that is covered by the in-orbit insurance, the pay revenues could be substantially adversely affected, with limited pos ment of the sum insured could result in material increases in costs. sibilities for mitigation. • military or similar action; • any anti-satellite device; SES has third party liability insurance that covers damage suffered SES’ business is vulnerable to increasing presence from non- • electromagnetic and radio interference (except for physical dam by third parties resulting from accidents such as launch failures and traditional Video distributors such as Netflix and Amazon and other age to a satellite directly resulting from this interference); satellite collisions. It is subject to an annual combined single limit of OTT players. While relying on a distribution architecture that does • confiscation by any governmental body; EUR 500 million. The entire SES fleet is covered by this policy. not include satellites, in many cases, these players compete directly • insurrection and similar acts or governmental action to prevent with SES’ customers and increasingly drive up the costs for premium ANNUAL REPORT 2019 REPORT ANNUAL such acts; sports and other content for SES’ customers. SES 77 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SES may be forced to reduce prices in respect of its Networks The inherent uncertainties in doing business in certain jurisdictions might have material advantages based on their owners’ capability to services in current and future agreements. This risk is caused by may have a negative impact on SES’ results. cross-subsidize and / or fertilize their satellite business with other various factors, including emergence of new technologies, such as parts of their business. LEO systems, which may claim ability to deliver lower pricing in the Inherent in doing business with the U.S. Government future, and pricing set in the past in long-term agreements which As a result of US national security laws and regulations, SES Govern In addition, SES competes with operators of terrestrial (fixed and wire may no longer allow SES’ customers to compete effectively in today’s ment Solutions, Inc. is subject to a proxy agreement with the US Gov less) networks. Any increase in the technical effectiveness or geo market. ernment (‘the Proxy Agreement’). The proxy structure imposed upon graphic spread of these terrestrial networks could result in a reduc SES Government Solutions is common for businesses contracting with tion in demand for SES’ satellite capacity. Some terrestrial operators SES’ customer base is subject to constant change. Bankruptcy of key the US Government and is similarly imposed on SES’ competitors. may receive state aid and subsidies not available to SES. customers or customer consolidation resulting from mergers and acquisitions can reduce demand for SES’ satellites capacity, thereby The US Government requires SES Government Solutions to enter into Developments and competition in the media market could result in a affecting SES’ revenues. the Proxy Agreement because SES Government Solutions is indirectly demand reduction for SES’ satellite services and / or pricing changes owned by SES, a foreign company, and SES Government Solutions resulting in a significant negative impact on SES’ revenues. Changing Customer credit has classified contracts with the US Government. As a result of the consumer behaviour and the emergence of terrestrial technological SES may suffer a financial loss if any of its customers fails to fulfil its Proxy Agreement, strict limitations are placed on the information that substitution, particularly non-linear over the top services, could lead contractual payment obligations. may be shared between SES Government Solutions and other SES to horizontal consolidation among satellite service providers and to subsidiaries. The Proxy Agreement also imposes restrictions on the a reduction in demand for satellite-based distribution. The level of customer credit risk may increase as SES, and / or its control of SES Government Solutions by SES. customers, grow revenues in emerging markets because credit risk Technology Risk tends to be higher in these markets (compared to the markets of It is important to note that inter-company activities including the pro The satellite communications industry is subject to increasing tech Europe and North America). vision of satellite capacity to SES Government Solutions for provision nological change. SES’ satellites and associated technology could to the US Government are permitted under the Proxy Agreement. become less suited to meet requirements due to unforeseen advances This risk is mitigated principally through a customer credit policy in communications technology, leading to a reduction in demand for that includes credit checks, credit profiles, deposits or other forms 5. RISKS RELATING TO THE SATELLITE its services and a negative impact on revenues. of security, monitoring of payment performance and the application COMMUNCIATIONS MARKET of a provisioning policy. In some cases, customer credit risks are The use of new technology to improve the signal compression rate could mitigated by credit insurance. Competition Risk lead to a reduction in demand for SES’ satellite services on the Video side, The telecommunications, connectivity and media market is fiercely which could lead to a negative impact on the financial results. Further details are provided in ›› note 18 to the consolidated financial competitive and SES faces competition from satellite (GEO and statements. planned LEO) and terrestrial (fixed and wireless) networks. 6. RISKS RELATING TO SES’ STRATEGIC DEVELOPMENT Inherent in International Business SES faces competition from international, national and regional GEO SES conducts business around the world. It is exposed to issues such satellite operators, as well as from planned LEO constellations. Some Emerging market risk as financial, regulatory, geopolitical, tax, sanctions and trade risks in national operators receive tax and regulatory advantages in their SES’ development strategy includes targeting new geographical areas many jurisdictions. Political and financial stability in some jurisdictions countries that are not available to SES. The development of national and emerging markets and developing joint ventures or partnerships ANNUAL REPORT 2019 REPORT ANNUAL may impact SES’ business in that country. In practice, it may be diffi satellite programmes in some countries may limit or prevent SES’ abil with local telecommunications, media and financial businesses in
SES cult for SES to enforce its legal rights in some jurisdictions. ity to compete in those countries. Some planned LEO constellations order to improve market access for its services. 78 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SES may be exposed to the inherent instability of doing business in 7. RISKS RELATING TO LEGAL, REGULATORY, Orbital slots, satellite systems and associated frequencies are a limited those regions. Such inherent instability could have an adverse impact SPECTRUM AND CORPORATE resource. The ITU may reallocate spectrum from satellite to terrestrial on SES’ revenues and operational costs. or other uses. In addition, national administrations are increasingly Legal Risk charging for access to spectrum by the use of fees and auctions. Please also see ‘Risks inherent in international business’ above. SES cannot always predict the impact of laws, regulations and politics on its operations. The operation of the business is and will continue Any reallocation of spectrum from satellite to terrestrial or other uses In some emerging markets, customers may be less financially secure to be subject to the laws, regulations and political will of the various or fees and charges assessed by national administrations may have a and run a higher risk of insolvency than in more developed markets. The governmental authorities of the countries in which SES operates, uses significant adverse effect on SES’ current results and future prospects. failure of a customer could have an adverse impact on SES’ revenues. radio spectrum or offers satellite capacity and services, as well as to the frequency coordination process of the International Telecommu Spectrum coordination risk Investment risk nication Union (the ‘ITU’). Legal, regulatory and political changes are SES is required to coordinate the operation of its satellites with other SES regularly evaluates opportunities to make strategic investments. outside SES’ direct control. New or modified rules, regulations, legis satellite operators through the relevant national administrations and These opportunities may not yield the expected benefits due to a lation, or decisions by a relevant governmental entity or the ITU could in accordance with the ITU process so as to prevent or reduce inter number of factors, such as evolving market conditions, antitrust materially and adversely affect operations. ference between satellites. SES may also be required to coordinate changes, financing costs and regulatory approvals. If an investment any replacement satellite that has performance characteristics that is made, it may adversely affect SES’ results due to financing costs or The international nature of SES’ business means that it is subject to differ from the satellite it replaces. the economic performance of the investment following acquisition. applicable sanctions, export control, competition and anti-bribery laws The success of any such investment is not guaranteed. and regulations including associated civil and criminal penalties. As a result of such coordination, SES may be required to modify the Risks concerning and violations of applicable compliance laws and proposed coverage areas of its satellites, satellite design or trans SES has a number of strategic investments in businesses that it does regulations may negatively affect future operations or subject SES to mission plans in order to eliminate or minimise interference with other not fully control. As a result, SES is dependent in part on the cooper criminal or civil enforcement actions. satellites or ground-based facilities. Those modifications may mean ation of other investors and partners in protecting and realising the that use of a particular orbital position is significantly restricted, full potential of certain investments. SES may not be able to prevent Disputes concerning SES’ business arise from time to time and can possibly to the extent that it may not be economical to place a new strategic partners from taking actions that are contrary to SES’ busi result in legal or arbitration proceedings. The outcome of these pro satellite in that location. In addition, interference concerns of a country ness interests. ceedings cannot be predicted. A negative outcome in a substantial may affect the ability of SES’ satellite network to generate revenues, litigation or arbitration case could have a material impact on SES’ due to the operational restrictions that the country may impose. SES also invests in new and innovative projects, which often feature business and financial position. new and unproven technology or uncertain market demand. If the Similarly, the performance of SES’ satellites in the affected areas could technology is not successful or demand does not materialise as Spectrum Access Risk be adversely affected if ITU regulations or other legal constraints fail planned, the economic value of SES’ investment may be reduced. Access to orbital slots and frequencies is required for SES to develop to prevent competing satellite operators from causing harmful inter and maintain its satellite fleet and services. ference by the operation of their satellites. SES has also earmarked certain funds for investment, which includes the replacement of existing satellites (often with increased capacity) The ITU is responsible for the allocation of spectrum for particular Spectrum use risk and the launching of new satellites. The successful marketing and sale uses and the allocation of orbital locations and associated frequen If SES does not occupy unused orbital locations by specified dead of new capacity is dependent on the underlying demand for satellite cies. Use of the spectrum and orbital positions is in accordance with lines, does not maintain satellites in the orbital locations it currently ANNUAL REPORT 2019 REPORT ANNUAL services in the targeted regional markets. If that demand does not the ITU Radio Regulations. SES can only access spectrum through uses or does not operate in all the frequency bands for which a licence
SES materialise as anticipated, SES’ financial forecasts may not be met. ITU filings made by a national administration. 79 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
has been received, then, in accordance with applicable national and Export control SES has policies and systems in place designed to monitor the com ITU regulations, those orbital locations or frequency bands may SES must comply with all applicable export control laws and regu pany’s activities and to prevent engaging in prohibited activities or become available for use by other satellite operators. lations. For example, the US has comprehensive export compliance dealing with sanctioned parties. Failure to obtain or maintain required regulations. As a result, any US information, products or materials that sanctions authorisations or failure to comply with applicable sanctions SES has access to a large portfolio of orbital locations and frequen SES provides to non-US entities relating to communications satellites, laws and regulations could have a material adverse effect on business. cies that have been filed at the ITU through various administrations. equipment, software and data are subject to US export control regu For each filing, the ITU and the national regulators impose various lations. SES’ US operations may not be able to maintain normal busi External threat risk conditions that must be met in order to secure the spectrum. Oper ness activities and SES’ non-US operations may not be able to source In common with other satellite operators, SES is vulnerable to the risk ational issues such as satellite launch failure, launch delay or in-orbit US satellites, hardware, technology and services if: of terrorist acts, sabotage, piracy, attack by anti-satellite devices, jam failure might compromise the access to the spectrum or orbital loca ming, unintentional interference and natural disaster. Such external tions. SES is committed to the highest quality satellite and launch • export licences are not timely obtained; threats may lead to a temporary or permanent interruption in service procurement processes, which helps to reduce this risk. In addition, • export licences do not permit transfer of all items requested; and / or the loss of customers. Any such act could have a potentially SES’ large fleet of satellites may in some circumstances permit the relo • satellite launches are not permitted in the locations that SES significant adverse effect on SES’ results. cation of in-orbit satellites in order to meet regulatory requirements. prefers; or • the requisite licence, when approved, contains conditions or restric Cyber risk Regulatory risk tions that pose significant commercial or technical problems. SES’ operations may be subject to hacking, malware and other forms SES may need to obtain and maintain approvals from authorities or of cyber-attack. Due to the fast-moving pace of new hacking tech other entities to operate its satellites and to offer satellite capacity Such occurrences could impede construction and delay the launch niques, the high sophistication of certain attackers and an increas and services. For example, SES must obtain licences, authorisations of any future satellites, adversely impacting current and / or future ingly hostile cyber-attack environment, it may be difficult to detect, or market access approvals in certain countries to enable provision revenues. SES must also comply with other applicable national export determine the scope of, contain and remediate every such event. of satellite capacity to those countries. The failure to obtain the laws and regulations. licences, authorisations or market access approvals necessary to Any inability to prevent or to detect the occurrence of cyber-attacks operate satellites or to offer satellite capacity and services could lead Sanctions compliance risk in a timely manner could result in a disruption of services or malfunc to loss of revenues and compliance actions against SES. As an international company, SES’ business is subject to applicable tions, loss of customers, inadvertent violations of data protection, financial and trade sanctions compliance laws and regulations. Sanc export control and other relevant laws, damage to SES’ reputation, or Each customer is responsible for obtaining regulatory approval for its tions laws and regulations restrict SES’ ability to provide services in, damage to SES’ properties, equipment and data. Furthermore, such operations. As a result, there may be governmental regulations inap export hardware or software to, certain countries or specific entities. event could result in large expenditures necessary to repair or replace plicable to SES that may adversely affect customers’ operations. SES In certain cases, SES may be able to obtain authorisation from the such networks or information systems or to protect them from similar could lose revenues if customers are unable to obtain any necessary relevant sanctioning country in order to provide service that would events in the future. approvals, if customers’ regulatory approvals are insufficient in the otherwise be subject to sanctions, however, there is no guarantee that view of the relevant regulatory authorities, if the necessary approvals such authorisation will be granted. As a result, SES may be required SES has protections in place to help protect its networks and contin are not granted on a timely basis or if any applicable licencing restric to forgo commercial opportunities that are subject to sanctions. ues to work to implement additional protective measures intended to tions become unduly burdensome. limit the risks associated with such attacks. ANNUAL REPORT 2019 REPORT ANNUAL SES 80 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
People-related risk 8. RISKS RELATING TO FINANCE However, SES cannot always be certain of a tax authority’s applica SES is competing for talent with large and well-known companies. In tion and interpretation of the tax law. SES may become subject to the context of low unemployment rates and a shortage of qualified Economic downturn risk unforeseen material tax claims, including late payment interest candidates, SES may have difficulties in finding and onboarding An economic slowdown in the countries where SES operates may have and / or penalties. Such claims may arise for a number of reasons, diverse and competent talent with the required capabilities. SES a negative effect on its performance if potential customers face dif including: the identification of a taxable presence of a non-indigenous attempts to mitigate this risk through the creation of a dedicated ficulties funding their business plans. This could, in turn, result in group company in a taxing jurisdiction; transfer pricing adjustments; Talent Acquisition function, to enhance the sourcing of high-quality decreased profitability, with significant negative consequences for application of indirect taxes on certain business transactions after candidates, improve the applicant experience, and network more SES’ business, financial condition and results of operations. the event; and the disallowance of the benefits of a tax treaty. In addi effectively with partners (universities, professional networks, recruit tion, SES may be subject to retroactive tax assessments based on ment agencies, referral programmes), as well as strengthening our Cash flow risk changes in laws in a particular tax jurisdiction. Employer Brand. SES operates in accordance with a strong business model. If, for any reason, SES is not successful in implementing its business model then SES has implemented a tax risks mitigation charter based on (among Through its internal Learning and Development programmes, SES cash flow and capital resources may not be sufficient to repay indebt other things) a framework of tax opinions for the financially material fosters the retention and in-house development of talent (Associate edness. If SES were unable to meet its debt service obligations, then positions taken, transfer pricing policies and documentation covering Programme, Leadership Programme, Mentoring Programme, Learning a default under debt agreements would occur. To avoid such default, the group’s important inter-company transactions, and procedures and Career Progression Opportunities) in order to reduce the risk of SES could be forced to reduce or delay the completion or expansion for accurate tax compliance in all jurisdictions. losing key contributors. of the satellite fleet, sell assets, obtain additional equity capital or restructure its debt. Asset impairment risk In addition, SES continues to nurture a high-performance culture SES’ non-current intangible and tangible assets are valued at historic founded on jointly endorsed behaviours aligned around a clear pur Credit rating risk cost less amortisation, depreciation (where relevant) and accumu pose and vision, helping teams to focus and remain energised in order A change in SES’ credit rating could affect the cost and terms of its lated impairment charges. The resulting net book values are subject to deliver on its customer promise. newly issued debt, as well as its ability to raise financing. SES’ policy to validation each year through impairment testing procedures, where is to attain, and retain, a stable investment grade rating with Standard they are compared to the higher of fair value or value-in-use of the If SES is unable to source, onboard, energise and retain key talent, it & Poor’s and Moody’s. If SES’ credit rating were downgraded, it may asset, representing the present value of the future cash flows expected could have a negative impact on SES’ business, financial situation and affect SES’ ability to obtain financing and the terms associated with to be derived from the asset. Where future assumptions for a specific results. that financing. SES cannot guarantee that it will maintain its invest asset, as set out in the approved Business Plan, become less favour ment grade credit ratings. able, or the discount rates applied to the future cash flows increase, Unforeseen high impact risk then this may result in the need for material asset impairment charges. SES’ operations may be subject to unforeseen events that are both Tax risk improbable and have a high impact. Due to the unforeseen nature of SES’ financial results may be materially adversely affected by unfore In the SES SA annual accounts, impairment testing—using value-in- the event, it is difficult to manage the impact of such events or pre seen additional tax assessments or other tax liabilities. use procedures similar to those outlined above—is performed on the dict the nature or extent of the damage. Such unforeseen events may carrying value of the shares in affiliate undertakings, or on the carry have a significant negative impact on SES’ business, financial situa SES does business in many different countries and is therefore sub ing value of groups of shareholdings where the Board of Directors tion and results. ject to taxation in multiple jurisdictions. SES makes provisions in its believes that it is more appropriate under the circumstances, and accounts for current and deferred tax assets and liabilities based on better reflects the substance of the activities, the interdependency ANNUAL REPORT 2019 REPORT ANNUAL a continuous assessment of prevailing tax laws in those jurisdictions. of the associated cash flows and their level of integration. If the car
SES rying value of the relevant investment, or group of investments, is not 81 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
substantiated by its value-in-use, and any shortfall is assessed as fixed rate borrowings. SES carefully monitors and adjusts the mix In accordance with Article 3 of the Luxembourg law of 11 January being other than a temporary nature, then this could result in an between fixed and floating rate debt from time to time, responding to 2008, as subsequently amended, on transparency requirements in impairment charge being recorded to the income statement of the market conditions. relation to information about issuers whose securities are admitted SES SA annual accounts in the period concerned. to trading on a regulated market, we declare that, to the best of our Interest rate derivatives may be used to manage the interest rate risk. knowledge, the annual statutory accounts as of and for the year ended Liquidity risk The terms of such derivatives are negotiated to match the terms of the 31 December 2019, prepared in accordance with Luxembourg legal SES requires liquidity to maintain its operations and meet its obliga hedged item to maximise the effectiveness of the hedge. Further details and regulatory requirements, and the consolidated financial state tions. Any liquidity problems may have a significant impact on SES’ are provided in ›› note 18 to the consolidated financial statements. ments as of end for the year ended 31 December 2019, prepared in operations and lead to the breach of contractual obligations. In case accordance with the International Financial Reporting Standards as of liquidity needs, SES can call on a number of committed and uncom Counterparty credit risk adopted by the European Union, give a true and fair view of the assets, mitted credit facilities with banks. In addition, if deemed appropriate SES’ exposure relates to the potential default of a counterparty hold liabilities, financial position and profit of the year of SES taken indi based on prevailing market conditions, SES can raise funds through ing financial assets (cash and cash equivalents, held for trading finan vidually, and of SES and its consolidated subsidiaries taken as a whole, its European Medium-Term Note programme or other debt capital cial assets, loans, receivables and derivative instruments). respectively. In addition, the management report includes a fair review market instruments. SES’ debt maturity profile is tailored to allow the of the development and performance of the business and the position company to cover repayment obligations as they fall due. The counterparty credit risk from a cash management perspective is of SES taken individually, and of SES and its consolidated subsidiar reduced by the implementation of several cash pools, accounts and ies taken as a whole, together with a description of the principal risks SES operates a centralised treasury function, which manages the related paying platforms with different counterparties. To mitigate the and uncertainties that they face. liquidity of SES and seeks to optimise the funding costs. This is sup counterparty risk, SES only deals with recognised financial institutions ported by a daily cash pooling mechanism. Further details are pro with an appropriate credit rating. All counterparties are financial insti 29 February 2020 vided in ›› note 18 to the consolidated financial statements. tutions that are regulated and controlled by the national financial supervisory authorities of the applicable countries. The counterparty Foreign exchange risk credit risk portfolio is analysed on a quarterly basis. Moreover, to SES’ reported financial performance can be impacted by movements reduce this counterparty risk, the portfolio is diversified as regards in the Euro / US dollar exchange rate, as SES has significant opera the main counterparties, ensuring a well-balanced relationship for all tions, cash flows, assets and liabilities that are denominated in US categories of products (derivatives as well as deposits). Further details Romain Bausch dollar whereby the Group’s functional currency is Euro. Furthermore, are provided in ›› note 18 to the consolidated financial statements. Chairman of the Board of Directors SES is exposed to movements in some other foreign currencies in which it generates revenue. RESPONSIBILITY STATEMENT
To mitigate this exposure, SES may enter into forward foreign The Board of Directors and the Executive Committee of the company exchange or similar derivatives contracts to hedge the exposure on reaffirm their responsibility to ensure the maintenance of proper financial debt or on the net US dollar assets. Further details are pro accounting records disclosing the financial position of the group with Steve Collar vided in ›› note 18 to the consolidated financial statements. reasonable accuracy at any time and ensure that an appropriate sys CEO tem of internal controls is in place to ensure the group’s business Interest rate risk operations are carried out efficiently and transparently. ANNUAL REPORT 2019 REPORT ANNUAL SES’ exposure to the risk of changes in market interest rates relates
SES primarily to SES’ floating rate borrowings as well as the renewal of its 82 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Any Director chairing one of the committees set up by the Board (if REMUNERATION REPORT not the Chairman of the Board) receives an annual fee of EUR 8,000. The Chair of the Audit and Risk Committee (if not the Chairman of the Board) receives an annual fee of EUR 9,600. REMUNERATION POLICY THE POLICY Remuneration per meeting The Company must attract suitable Directors and SLT members to Directors receive EUR 1,600 for each Board meeting or Board com PURPOSE AND SCOPE OF THE POLICY continue its success. Along with being an overall attractive Company, mittee meeting they attend, with the exception of the Audit and Risk remuneration is one part of the Company’s ability to do so. Conse Committee for which a fee of EUR 1,920 per meeting is paid. The purpose of the present Policy is to describe the remuneration quently, this Policy contributes to the Company’s business strategy paid by the Company to the Directors and to the members of the and long-term interests and sustainability. It is important to note that a Director participating in more than one Strategic Leadership Team (SLT). committee meeting on the same day will receive the attendance fee Remuneration must reflect the degree of required qualifications and for one meeting only. Half of the attendance fee is paid if the Director It describes: experience of the Directors and ExComm members, the risks that they participates in the meeting via telephone or videoconference. take personally, and honour the dedication and efforts that the Direc • how the policy contributes to the Company’s objectives relating to tors and ExComm members put into the Company. The Remuneration The terms of the Directors its business strategy and long-term interests and sustainability; must also be relative to the pay and employment conditions of the In general, the Company’s directors are elected for terms of three • the different components of remuneration, including all bonuses employees of the Company. years. If a Director leaves the Board during his/her term, the Company and other benefits in whatever form, if any, awarded to Directors may co-opt a Director to finish that mandate. and SLT members and indicates their relative proportion; REMUNERATION OF DIRECTORS • how the pay and employment conditions of employees of the Com A Director can be revoked at any moment by the shareholders. There pany were taken into account when establishing the Policy; The remuneration granted to Directors consists of: is no notice period for a Director. • the duration of the contracts or arrangements with the Directors and SLT members, the applicable notice periods, the main charac • a fixed annual fee and The maximum tenure on the Board is limited to 12 years (generally teristics of supplementary pension or early retirement schemes • a fee per Board or committee meeting attended as described below. four terms of 3 years each). and the terms of, and payments linked to, termination; • the decision-making process followed for the determination, review All these fees are net of any Luxembourgish withholding taxes on The age limit of the Directors is set at 72 years. Any Director who and implementation of the Policy, including measures to avoid or directors’ fees. Board members do not receive any stock options, nor reaches this age during his/her mandate will resign at the AGM manage conflicts of interests and, where applicable, the role of the do they receive any bonus. following this date. Remuneration Committee; • the procedural conditions under which any derogation from the Fixed remuneration per year Policy can be applied as well as the elements of the Policy from The fixed component of the remuneration encompasses EUR 40,000 which a derogation is possible. per year whereas the Vice Chairmen each receive an annual fixed fee of EUR 48,000 and the Chairman receives a fee of EUR 100,000 The Policy covers all forms of remuneration being paid either to a per year. ANNUAL REPORT 2019 REPORT ANNUAL Director or an SLT member. SES 83 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
REMUNERATION OF SLT MEMBERS The AB of SLT members is based on the yearly performance • for the CEO: based on a proposal by the Chairperson of the Board during the relevant year and is paid out in March of the following and The remuneration of SLT members comprises the following two major year after review by the Remuneration Committee in its first meeting • for the other ExComm members: based on a proposal by the CEO. components: of the year. b) a discretionary part solely determined by the Remuneration Com 1. the compensation package composed of the: The AB target for SLT members ranges from 50% to 100% of YBS. mittee (25% of the AB). 1.1 Yearly base salary (“YBS”); 1.2 Annual bonus (“AB”); The minimum pay-out can be as low as 0% of the AB (in other words The discretionary element is fixed by the Remuneration Com 1.3 Long-term equity (“LTE”); no bonus payment), with a maximum pay-out capped at 150% of the mittee based on several factors including business and individual 2. the benefits including, but not limited to: bonus target. performance of the ExComm member. 2.1 Company car; 2.2 Pension and health care plans; The AB of each SLT member is composed of two parts: 1.3 Long-Term Equity (LTE) 2.3 Death and disability insurance. The LTE is regulated by the EBCP. 1.2.1 Financial performance (accounting for 50% of the AB) In line with the Charter of the Remuneration Committee of the The financial performance measures the actual achievement vs. The objective of the EBCP is to enhance the competitiveness of the Company, remuneration matters of the SLT members are reviewed, budget for the following set of metrics with their respective weights: Company and its affiliates in attracting and retaining the best global discussed and decided by the Remuneration Committee. EBITDA (60% of the AB), net profit (20% of the AB) and net operating executive talent, and to position the Company as a global employer cash flow (20% of the AB). The budget targets for those measures of choice. Moreover, the EBCP is designed to ensure that SES group 1.1 Yearly base salary are set during the annual budget process and finally approved by the executives become shareholders of the Company, feel a sense of own The base salary of SLT members is reviewed by the Remuneration Board. CEOs of SES Networks and SES Video are also measured on ership, and benefit from their contribution to increasing shareholder Committee in its first meeting of the year. The Remuneration the financial performance vs. budget of their respective business value. Committee has the sole authority, besides the legally required cost units. of living adjustments (i.e. Luxemburg index), to adjust the YBS of To this end, the EBCP provides for the discretionary grant or award SLT members. 1.2.2 Individual performance (accounting for 50% of the AB) of equity-based incentive compensation in the form of: The individual performance is split into two equal components: For all new nominations as SLT member, remunerations are set by the 1.3.1 stock options, representing one third of the total LTE grant, Remuneration Committee on the basis of external benchmarks pro a) achievement against individual objectives (25% of the AB); 1.3.2 restricted shares, representing one sixth of the LTE grant and vided by compensation consultants thereby considering employment 1.3.3 performance shares, representing one half of the LTE grant and conditions at the time of the offer. The individual objectives are set at the beginning of each year with a vesting which is subject to both the individual perfor by the Remuneration Committee based on a proposal prepared mance of the executive and the Company´s financial perfor 1.2 Annual bonus (AB) by the CEO together with the ExComm. mance. The main objective of the bonus plan for the SLT is to create a per formance reward scheme, that links annual variable compensation to The Remuneration Committee determines, at the end of each The grant shall be determined by the Remuneration Committee in its the Company’s financial results as well as the SLT members’ personal year, whether the relevant SLT member achieved his individual sole discretion. and collective performance. Through this plan, the Company ensures objectives targets during that year. It will do so ANNUAL REPORT 2019 REPORT ANNUAL alignment and focus on the company objectives. For ExComm members, the annual LTE grant value ranges from 58%
SES to 105% of the YBS. 84 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
1.3.1 Stock Options 1.3.3 Performance Shares Benefits The stock option is a standard call option with a maturity of 10 years Performance shares are FDRs granted to the executives and the fol The following key benefits are provided to ExComm members, the from the date of the option grant. lowing two criteria must be fulfilled for the performance shares to vest amount of which is aligned with local practices: entirely: The final strike price corresponds to the average of 15 days closing • pensions and health care plans: in Luxembourg, pension contribu prices of the Company’s FDRs at the Paris stock exchange after the • the compounded three years adjusted EVA is positive; and tions of 7% up to the Social Security Ceiling (SSC) and 19% for the allocation of options by the Remuneration Committee. • over the three years vesting period, personal objectives have to be portion of salary above the SSC. The complementary pension met (‘successful performance’) and can only be one year slightly scheme is a defined contribution scheme. In the US, restoration The grant value is determined by the multiplication of the YBS with below expectations for a successful performer. plans are in place to provide retirement benefits that supplement the applicable percentage. the tax-qualified, defined-contribution pension account defined in The adjusted EVA measures the value created in excess of the subsection 401(k) of the United States Internal Revenue Code; The number of stock option units is derived directly by dividing the required rate of return the Company has to provide to shareholders • health check-up for ExComm members; grant value by the value of the stock option which is computed by an and debtholders. The adjusted EVA is generally reviewed by the • death and disability insurances; external and independent valuation firm and using a Binomial or Remuneration Committee in its second meeting of each year. • company car or car allowances. Black-Scholes valuation (Aon-Hewitt in the past years). The final stock option valuation of each grant is then approved by the Remu In the event that only criteria 1. is not fulfilled, a ratchet table will apply In addition to the above: neration Committee. to determine the proportion of performance shares that will vest (min imum 50% and maximum 100% payout). • several ExComm members benefit from temporary tax support and The stock options must vest before they can be exercised. The vest participation in school fees; ing period of stock options is four years with an annual vesting of 25% The number of performance shares is determined by multiplying the • one ExComm member benefits from additional pension plan on 1 January of each year. As an example, if 100 stock options are YBS with the applicable percentage and divided by the average 15 arrangements; granted in May 2019, the first 25 stock options can be exercised as of days preliminary share price. • one ExComm member benefits from a UK based benefit package 1 January 2020, the next 25 as of 1 January 2021, the next 25 as of that includes life, disability and health insurance as well as gross 1 January 2022 and the final 25 as of 1 January 2023. The executives must, when exercising their vested stock options and pension allowance. their vested shares, do this in accordance with the regulations of the 1.3.2 Restricted Shares French stock market authorities AMF and the SES Code of dealing The restricted shares are FDRs granted to the executives with the securities (i.e. require the prior authorization from the Corporate Sec sole condition that at the day the restricted shares vest, the execu retary and/or Chief Financial Officer, not during a closed period, oth tive is employed by the Company. The restricted shares vest on 1 June ers). As for the members of the Board, the exercises by the ExComm of the third year following the year of the grant. No step vesting is members are reported on the Company’s website under About Us -> applied in order to enhance the retention factor. Corporate Governance -> Management Disclosures.
The number of restricted shares granted to each executive is deter mined by multiplying the relevant YBS with the applicable percentage and divided by the average 15 days preliminary share price. ANNUAL REPORT 2019 REPORT ANNUAL SES 85 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Employment, Resignation and Termination SLT members share ownership program DISCLOSURE ExComm members are hired on a permanent basis and employment The ExComm members have an obligation to invest in the Company’s contracts are drafted according to local regulations. equity (executive share ownership). Over a period of five years (with After the vote of the shareholders this Policy together with the date equal yearly investment), the SLT members have to hold in total one and the results of the vote shall be made available on the website of One ExComm member has an employment contract with an American time their YBS and the CEO two times his YBS. the Company where it will remain publicly available, free of charge, as subsidiary of the Company while all other ExComm members have long as it will be applicable. employment contracts with the Company or a Luxembourg subsidi This program aims at assuring that SLT members become sharehold ary of the Company. ers of the Company, feel a sense of ownership, and focus on creating PERIODIC REVIEW shareholder value. In case of resignation or termination, any unvested portion of out This Policy shall be reviewed on a regular basis, but at least every standing stock options, restricted and performance shares is imme SHAREHOLDER VOTE three years. diately forfeited. This excludes members leaving the Company due to disability or for retirement, benefitting from an immediate vesting of The present Policy will be submitted to a shareholders vote at the The Remuneration Committee shall be responsible for advising the all unvested equity. next annual general meeting, as will any material subsequent changes. Board on any concrete amendment suggestions to this Policy. The The policy will be submitted to the shareholders at a minimum every final version that will be submitted to the shareholders will be The Company and the ExComm member can terminate the employ four years. approved by the Board. ment contract respecting the legal notice period. For the ExComm member with an employment contract with an American subsidiary While the vote by the shareholders at the annual general meeting is of the Company the employment contract stipulates a notice period advisory only, the Company will pay its Directors and ExComm members of 30 days in case of termination or resignation. only in accordance with a remuneration policy that has been submitted to a vote at the general meeting. If the general meeting rejects the All members of the ExComm are entitled to two years of YBS in case proposed remuneration policy, the Company will submit a revised of termination without cause. The indemnity includes statutory policy to a vote at the following general meeting. severance payment, if any. ANNUAL REPORT 2019 REPORT ANNUAL SES 86 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
REMUNERATION REPORT Directors each receive a fixed fee of EUR 40,000 per year, whereas During 2019, the Board and the Committees of the Board were com each of the Vice Chairs receives an annual fixed fee of EUR 48,000 posed as follows: and the Chair receives a fee of EUR 100,000 per year. The current remuneration report describes the remuneration of both CHAIRPERSONS BOARD OF DIRECTORS: the Board of Directors and of the SLT. It has been drafted following A director who chairs one of the committees set up by the Board, if the adoption of the Luxembourg Shareholder Rights Law of 1 August not the Chair of the Board of Directors, receives an additional remu • Romain Bausch, Chair 2019 and complies with the Company’s Remuneration Policy that has neration of EUR 8,000 per year. A director who chairs the Audit and • Tsega Gebreyes, Vice-Chair, been approved by the Board and which will be submitted to the share Risk Committee, if not the Chair of the Board of Directors, receives • Anne-Catherine Ries, Vice-Chair holders for approval on 2 April 2020. an additional remuneration of EUR 9,600 per year. CHAIRPERSONS OF THE COMMITTEES: DIRECTORS REMUNERATION The shareholders also maintained the fees at EUR 1,600 for each Board or Board committee meeting, except for the meetings of the • Marc Beuls (replaced by Katrin Wehr-Seiter from June 2019) The annual general meeting of shareholders has approved the remu Audit and Risk Committee for which directors receive EUR 1,920 • Jean-Paul Zens (replaced by Paul Konsbruck from June 2019) neration of the Members of the Board of Directors through approving per meeting. A director participating in more than one committee • Conny Kullman (replaced by Françoise Thoma from mid-June 2019) a resolution that has been submitted by the Board of Directors on an meeting on the same day will receive the attendance fee for one annual basis. meeting only. OTHER MEMBERS:
In 2019, the shareholders decided to maintain the fees paid to the Half of the attendance fee is paid if the director participates in the • Serge Allegrezza (from June 2019) directors at the previous year’s level with a majority of 99.983%. The meeting via telephone or videoconference. All of these fees are net • Victor Casier fees paid to the Board have not been increased since 2008, except of any Luxembourg withholding taxes. • Hadelin de Liedekerke Beaufort for the fees paid to the members of the Audit and Risk Committee • Ramu Potarazu (from April 2019) which have been increased in 2015. The total net remuneration fees paid in the year 2019 to the mem • Kaj-Erik Relander (From June) bers of the Board of Directors amounted to EUR 922,880 of which • Jean-Paul Senninger (replaced by Marc Serres from June 2019) EUR 250,880 was paid as variable fees, with the remaining • François Tesch EUR 672,000 representing the fixed part of the Board fees. The gross overall figure for the year 2019 was EUR 1,153,600.
These amounts cover the fees paid for Board meetings, meetings of the Board Committees described in the table below, as well as meet ings of the Chairman’s Office. The amounts relate to the Board fees actually paid during the year 2019. ANNUAL REPORT 2019 REPORT ANNUAL SES 87 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Committee Membership and Meetings T12 COMPENSATION PACKAGE Audit and Nomination Remuneration Strategy and Risk Committee Committee Committee Investment Committee BASE SALARY Chair • Marc Beuls (until 3 April) • Jean-Paul Zens (until 3 April) • Conny Kullman (until mid-June) • Steve Collar • Katrin Wehr-Seiter • Anne-Catherine Ries (from June) • Françoise Thoma (from mid-June) The yearly base salary is reviewed annually by the Remuneration (from June) Committee. For any new nomination, it is set based on external bench Members • Serge Allegrezza • Romain Bausch • Serge Allegrezza (from June) • Romain Bausch marks thereby considering employment conditions at the time of the • Victor Casier • Tsega Gebreyes • Romain Bausch • Ramu Potarazu offer. • Ramu Potarazu (from 4 April) • Conny Kullman (until June) • Tsega Gebreyes • Anne-Catherine Ries • Kaj-Erik Relander • Kaj-Erik Relander (from June) • Hadelin de Liedekerke Beaufort • Kaj-Erik Relander • Françoise Thoma • François Tesch • Françoise Thoma • Katrin Wehr-Seiter For 2019 the total amount of base salaries paid to the members of the • Katrin Wehr-Seiter • Françoise Thoma • Jean-Paul Zens (until June) SLT was EUR 3,812,112.32. • Ramu Potarazu Number of Meetings Each member of the SLT is entitled to two years of base salary in case in 2019 4 8 5 3 his or her contract is terminated without cause. A member of the SLT who resigns is not entitled to any compensation. In 2019 no additional indemnities were paid for the departing SLT members. The above data resulted in the following gross payments in 2019: The remuneration of the SLT members comprises two major components: Annual bonus Chair EUR 154,000 1. the compensation package: The main objective of the annual bonus plan is to create a perfor Vice-Chair from EUR 85,000 to EUR 94,400 • composed of the yearly base salary, mance reward scheme that links annual variable compensation to the Director from EUR 64,400 to EUR 86,600 • an annual bonus, and company’s financial results and the individual’s performance. The • long-term equity (LTE) annual bonus of members of the SLT is composed of two parts, each SLT REMUNERATION accounting for 50% of the bonus: 2. a benefits package which is aligned with local practices. The remuneration of the members of the SLT is determined by the 1. the financial performance of the Company; Remuneration Committee, based on a delegation from the Board of The average to highest compensation ratio (comprising annual base 2. the individual performance. The latter is split into two equal Directors. It is regularly benchmarked against peer companies, in par salary, bonus and equity at target) for all employees at the level of instalments: (i) achievement against individual objectives; and ticular regarding the elements composing the remuneration. More SES S.A. is 1 to 12 which is well below market benchmarks and ratios (ii) a discretionary part solely determined by the Remuneration details on these elements can be found on the Company’s website which can be observed in CAC 40 or FTSE 100 companies. Committee. www.ses.com where a copy of the Remuneration Policy can be found. The amounts indicated below relate to the remuneration of ten SLT members, eight of which were members of the SLT for the full year 2019. ANNUAL REPORT 2019 REPORT ANNUAL SES 88 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Annual Bonus Calculation G23 THE SLT LONG-TERM EQUITY INCENTIVES The adjusted EVA used for remuneration purposes has the Invested Capital reduced for the assets under construction to ensure focus of 25% The third element of the compensation package relates to the long- management on long-term investments. Achievement 50% granted by the Company. The plan, managed by the Financial against Individual term equity performance Objectives Remuneration Committee, permits the grant of three equity types: During 2019, the members of the SLT were awarded a combined total of the Com- 1. stock options; 2. restricted shares; and 3. performance shares. The of 729,309 options to acquire company FDRs at an exercise price of pany total grant value is divided into one-third of stock options, one-sixth EUR 15.005 as well as 36,744 restricted shares as part of the company’s of restricted shares, and one half of performance shares. long-term incentive plan and 110,232 performance shares.
The stock option is a standard call option with a maturity of 10 years. The performance and restricted shares 2016 as well as stock options The final strike price is determined as the fair market value with an exercised in 2019 amounted to EUR 1,906,791.32. 25% average of 15 days closing prices at the Paris stock exchange after Discretionary the numbers of options have been determined by the Remuneration When exercising their vested stock options and their vested shares, Part Committee. The vesting period is over four years with a yearly vest the executives must do this in accordance with the SES Dealing Code ing of 25% on 1 January of each year following the grant. (including requiring the prior authorization from the Corporate Secretary and/or Chief Financial Officer and provide selling orders The Restricted Shares are FDRs granted to the executives with the outside of a closed period). sole condition that, at vesting, the executive must be employed by The financial performance SES. The Restricted Shares vest on 1 June of the third year following During 2019, Ferdinand Kayser, Christophe De Hauwer, John Purvis The financial performance measures actual achievement vs. budget the year of their grant. Performance Shares are FDRs granted to the and Ruy Pinto sold some or all of the restricted and performance for three elements, most important of which is group EBITDA executives with two additional vesting conditions. Those conditions shares that vested on 1 June 2019. Ferdinand Kayser and John Baughn (accounting for 60%), complemented by net profit (20%) and net reflect two performance criteria, that must be fulfilled: exercised some of their stock options and sold the corresponding operating cash flow (20%). CEOs of SES Networks and SES Video are shares while Steve Collar, John Baughn, Evie Roos, John-Paul also measured on the financial performance vs. budget of their 1. The compounded three years adjusted Economic Value Add Hemingway and John Purvis bought additional shares during 2019. respective business units. All budget targets are set by the Board of (adjusted EVA) must be positive; and Christophe De Hauwer sold some of his shares during the year. Directors during the annual budget process. 2. Over the three-year vesting period, the personal objectives must be met and can only be one year slightly below expectations. As for the members of the Board, all of these transactions by mem The individual business objectives bers of the SLT are reported on the SES website. The individual business objectives are set at the beginning of the year During 2019, and applicable from 2020 onward, the Board amended by the Remuneration Committee. At year-end, the Remuneration the Equity Based Compensation Plan based on a recommendation BENEFITS PACKAGE Committee assesses in detail the performance of the SLT to deter from the Remuneration Committee to adjust the first of the two per mine the target achievement. formance criteria, by replacing the binary vesting condition with a As for the benefits provided to members of the SLT, they are aligned linear ratchet table which will determine the proportion of perfor with local practices. For 2019, the total benefits and other remunera In 2019 the total annual bonus paid to members of the SLT was mance shares that will vest (minimum 50% for a three year com tion elements paid by the company were EUR 2,293,371.99 and EUR 2,806,120.82. pounded adjusted EVA at or below EUR 400 million negative and include pensions, health care plans, social security, death and disa ANNUAL REPORT 2019 REPORT ANNUAL maximum 100% payout if the metric is positive). bility insurance. SES 89 90 SES ANNUAL REPORT 2019 COMPANY OUR 1 REPORT AND STRATEGIC OPERATIONAL 2 3 101 STATEMENTS FINANCIAL CONSOLIDATED 3 99 98 97 96 95 91 STATEMENTS FINANCIAL CONSOLIDATED financial statements toNotes theconsolidated in shareholders’ equity Consolidated statementConsolidated ofchanges statementConsolidated ofcashflows statementConsolidated offinancialposition statementConsolidated ofcomprehensive income statement income Consolidated Audit report
ACCOUNTS SES S.A.ANNUAL 4
INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
AUDIT REPORT
To the Shareholders of SES S.A. BASIS FOR OPINION KEY AUDIT MATTERS
REPORT ON THE AUDIT OF We conducted our audit in accordance with the EU Regulation Key audit matters are those matters that, in our professional judg THE CONSOLIDATED FINANCIAL No 537/2014, the Law of 23 July 2016 on the audit profession (Law of ment, were of most significance in our audit of the consolidated finan STATEMENTS 23 July 2016) and with International Standards on Auditing (ISAs) as cial statements of the current period. These matters were addressed adopted for Luxembourg by the “Commission de Surveillance du in the context of our audit of the consolidated financial statements OUR OPINION Secteur Financier” (CSSF). Our responsibilities under the EU Regu as a whole, and in forming our opinion thereon, and we do not provide lation No 537 / 2014, the Law of 23 July 2016 and ISAs as adopted for a separate opinion on these matters. In our opinion, the accompanying consolidated financial statements Luxembourg by the CSSF are further described in the “Responsibilities give a true and fair view of the consolidated financial position of of the “Réviseur d’entreprises agréé” for the audit of the consolidated Revenue recognition SES S.A. (the “Company”) and its subsidiaries (the “Group”) as at financial statements” section of our report. The application of revenue recognition accounting standards is com 31 December 2019, and of its consolidated financial performance and plex and involves a number of key judgements and estimates in the its consolidated cash flows for the year then ended in accordance We believe that the audit evidence we have obtained is sufficient and determination of the appropriate accounting treatment (lease vs. with International Financial Reporting Standards (IFRSs) as adopted appropriate to provide a basis for our opinion. service arrangements, identification of the performance obligations, by the European Union. barter transactions, principle versus agent considerations, etc.). We are independent of the Group in accordance with the International Our opinion is consistent with our additional report to the Audit and Ethics Standards Board for Accountants’ Code of Ethics for Profes We focused on this area due to the inherent complexity and judge Risk Committee. sional Accountants (IESBA Code) as adopted for Luxembourg by the ment in applying the revenue recognition accounting standards and CSSF together with the ethical requirements that are relevant to our to the significant focus on the revenue amount (EUR 1,983.9 million What we have audited audit of the consolidated financial statements. We have fulfilled our for the year ended 31 December 2019) by the users of the consoli The Group’s consolidated financial statements comprise: other ethical responsibilities under those ethical requirements. dated financial statements.
• the consolidated statement of financial position as at 31 December 2019; To the best of our knowledge and belief, we declare that we have not How our audit addressed the Key audit matter • the consolidated income statement for the year then ended; provided non-audit services that are prohibited under Article 5(1) of • We obtained an understanding of the main revenue streams and • the consolidated statement of comprehensive income for the year the EU Regulation No 537 / 2014. evaluated the accounting policy for revenue recognition thereof; then ended; • We held discussions with Management on IFRS accounting • the consolidated statement of cash flows for the year then ended; The non-audit services that we have provided to the Company and analysis of any non-standard revenue contracts, performed testing • the consolidated statement of changes in shareholders’ equity for its controlled undertakings, if applicable, for the year then ended, are of significant new revenue contracts and verified that the under the year then ended; and disclosed in ›› note 5 to the consolidated financial statements. lying revenue transactions were accounted in accordance with the • the notes to the consolidated financial statements, which include substance of the commercial agreement and the relevant IFRS a summary of significant accounting policies. standards; ANNUAL REPORT 2019 REPORT ANNUAL SES 91 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
• We performed substantive analytical procedures at year-end on • We agreed the forecasted cash flows used for the calculation of on the satellites capability to generate future cash inflows, and revenue and revenue related accounting in order to identify any the value in use to the 2020 Business Plan as approved by the implicitly on the recoverable amount of the satellites; unusual variances; Board of Directors; • We evaluated the forecasted revenue and costs assumptions, • We tested certain unusual and/or significant manual journal entries • We evaluated the forecasted revenue and costs assumptions, con considering our expectations in terms of significant developments made to the revenue accounts, both at local and group level; sidering our expectations in terms of significant developments dur during the forecast period (significant new contracts or loss • We evaluated the deferred revenue schedules and their reconcili ing the forecast period (significant new contracts or loss thereof) thereof) and corroborated these with market data in respect of ation with the accounting; and corroborated these with market data in respect of demand for demand for satellite capacity and pricing; • We performed substantive testing of a sample of revenue transactions; satellite capacity and pricing; • We involved valuation specialists and validated the method used • We considered the disclosures in the consolidated financial state • We evaluated the capital expenditure assumptions, considering our to derive the value in use of satellites presenting a risk of impair ments and assessed their appropriateness. expectations in terms of significant developments during the fore ment. We independently recalculated the weighted average cost cast period (capital expenditure programs, replacement of satel of capital based on the use of market data; Impairment of goodwill and orbital slots license rights lites) and the expected capital expenditure level in terminal period • We performed sensitivity analysis of the models to changes in the (indefinite life) in order to maintain the current assets base; key assumptions; The Group has goodwill of EUR 2,264.3 million and orbital rights with • We performed sensitivity analysis of the models to changes in the • We considered the disclosures in ›› note 12 to the consolidated indefinite useful lives of EUR 2,095.0 million. An impairment charge key assumptions; financial statements. of EUR 64.0 million was recognised for the year ended 31 Decem • We considered the appropriateness of the disclosures in ›› note 14 ber 2019 in relation to the MX1 CGU ›› see note 14. to the consolidated financial statements. Taxation The Group operates across a large number of jurisdictions and is Management performed the annual impairment test that is based on Impairment of satellites subject to various tax legislations and periodic reviews by local tax the value in use determined on the basis of a discounted cash flows The Group has a space segment assets balance, representing primar authorities of a range of tax matters during the normal course of model. ily satellites, of EUR 4,719.0 million as at 31 December 2019. An impair business, including transfer pricing. ment charge of EUR 32.8 million was recognised for the year ended We focused on this area due to the high level of judgement in relation 31 December 2019 in relation to four satellites, due to the decrease Moreover, the current tax structure of the Group evolves to consider with the assumptions used in the calculation of the recoverable of their forecasted future revenue ›› see note 12. the recent developments in international taxation. amounts (forecasted cash flows, growth rates, discount rates, etc.). The valuation of the satellites might be impacted by events that may We focused on two specific tax matters relating to the provisions for How our audit addressed the Key audit matter or may not be under Management’s control (e.g., solar array issues) tax risks, and the recognition and recoverability of the deferred tax • We tested the design and implementation of relevant internal or by decrease in revenue due to unfavorable market developments. assets, due to the high level of judgment in the determination of the controls; Moreover, there is a risk of impairment of the satellites due to obso current and deferred income tax balances and the determination of • We evaluated Management’s determination of the cash generating lescence in the context of rapid evolution of technology. the level of the tax provisions. units as well as the method and model used for the determination of the value in use, considering the requirements of IAS 36; How our audit addressed the Key audit matter How our audit addressed the Key audit matter • We involved valuation specialists and independently recalculated • We tested the design and implementation of relevant internal • We tested the design and implementation of controls in respect of the weighted average cost of capital based on the use of market controls; tax accounting, including the determination of the provisions for data and verified the long-term growth rate to market data; • We discussed with Management and in particular, the engineering tax risks; ANNUAL REPORT 2019 REPORT ANNUAL team about any satellite health issues and evaluated their impact • We involved tax specialists in Luxembourg, the Netherlands and
SES the USA, representing the main tax jurisdictions where the Group 92 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
has exposure, to gain an understanding of the current tax risks and RESPONSIBILITIES OF THE BOARD OF individually or in the aggregate, they could reasonably be expected evaluated the current and deferred tax income and expense and DIRECTORS AND THOSE CHARGED WITH to influence the economic decisions of users taken on the basis of related balances; GOVERNANCE FOR THE CONSOLIDATED these consolidated financial statements. • We held discussions with the Group Tax Management to under FINANCIAL STATEMENTS stand and evaluate positions taken on uncertain tax risks and As part of an audit in accordance with the EU Regulation No 537 / 2014, assessed Group tax provision; The Board of Directors is responsible for the preparation and fair pres the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by • We discussed with Management the status of the open tax audits entation of the consolidated financial statements in accordance with the CSSF, we exercise professional judgment and maintain profes and evaluated their impact on the consolidated financial state IFRSs as adopted by the European Union, and for such internal con sional scepticism throughout the audit. We also: ments; trol as the Board of Directors determines is necessary to enable the • We analysed the recognition and recoverability of the deferred tax preparation of consolidated financial statements that are free from • identify and assess the risks of material misstatement of the con assets and determined that it is supported by forecast future tax material misstatement, whether due to fraud or error. solidated financial statements, whether due to fraud or error, design profits; and perform audit procedures responsive to those risks, and obtain • We considered the appropriateness of the disclosures in ›› notes 7 In preparing the consolidated financial statements, the Board of audit evidence that is sufficient and appropriate to provide a basis and 8 to the consolidated financial statements. Directors is responsible for assessing the Group’s ability to continue for our opinion. The risk of not detecting a material misstatement as a going concern, disclosing, as applicable, matters related to going resulting from fraud is higher than for one resulting from error, as OTHER INFORMATION concern and using the going concern basis of accounting unless the fraud may involve collusion, forgery, intentional omissions, mis Board of Directors either intends to liquidate the Group or to cease representations, or the override of internal control; The Board of Directors is responsible for the other information. The operations, or has no realistic alternative but to do so. • obtain an understanding of internal control relevant to the audit in other information comprises the information stated in the consoli order to design audit procedures that are appropriate in the cir dated management report and the Corporate Governance Statement Those charged with governance are responsible for overseeing the cumstances, but not for the purpose of expressing an opinion on but does not include the consolidated financial statements and our Group’s financial reporting process. the effectiveness of the Group’s internal control; audit report thereon. • evaluate the appropriateness of accounting policies used and the RESPONSIBILITIES OF THE ‘RÉVISEUR reasonableness of accounting estimates and related disclosures Our opinion on the consolidated financial statements does not cover D’ENTREPRISES AGRÉÉ’ FOR THE AUDIT OF made by the Board of Directors; the other information and we do not express any form of assurance THE CONSOLIDATED FINANCIAL STATEMENTS • conclude on the appropriateness of the Board of Directors’ use of conclusion thereon. the going concern basis of accounting and, based on the audit evi The objectives of our audit are to obtain reasonable assurance about dence obtained, whether a material uncertainty exists related to In connection with our audit of the consolidated financial statements, whether the consolidated financial statements as a whole are free events or conditions that may cast significant doubt on the Group’s our responsibility is to read the other information identified above from material misstatement, whether due to fraud or error, and to issue ability to continue as a going concern. If we conclude that a mate and, in doing so, consider whether the other information is materially an audit report that includes our opinion. Reasonable assurance is a rial uncertainty exists, we are required to draw attention in our audit inconsistent with the consolidated financial statements or our knowledge high level of assurance, but is not a guarantee that an audit conducted report to the related disclosures in the consolidated financial state obtained in the audit, or otherwise appears to be materially misstated. in accordance with the EU Regulation No 537 / 2014, the Law of ments or, if such disclosures are inadequate, to modify our opinion. If, based on the work we have performed, we conclude that there is a 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF Our conclusions are based on the audit evidence obtained up to material misstatement of this other information, we are required to will always detect a material misstatement when it exists. Misstate the date of our audit report. However, future events or conditions report that fact. We have nothing to report in this regard. ments can arise from fraud or error and are considered material if, may cause the Group to cease to continue as a going concern; ANNUAL REPORT 2019 REPORT ANNUAL SES 93 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
• evaluate the overall presentation, structure and content of the con REPORT ON OTHER LEGAL AND solidated financial statements, including the disclosures, and REGULATORY REQUIREMENTS whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair The consolidated management report is consistent with the consol presentation; idated financial statements and has been prepared in accordance with • obtain sufficient appropriate audit evidence regarding the financial applicable legal requirements. information of the entities and business activities within the Group to express an opinion on the consolidated financial statements. We The Corporate Governance Statement is included in the consolidated are responsible for the direction, supervision and performance of management report. The information required by Article 68ter Para the Group audit. We remain solely responsible for our audit opinion. graph (1) Letters c) and d) of the Law of 19 December 2002 on the commercial and companies register and on the accounting records We communicate with those charged with governance regarding, and annual accounts of undertakings, as amended, is consistent with among other matters, the planned scope and timing of the audit and the consolidated financial statements and has been prepared in significant audit findings, including any significant deficiencies in accordance with applicable legal requirements. internal control that we identify during our audit. We have been appointed as “Réviseur d’Entreprises Agréé” of the We also provide those charged with governance with a statement that Group by the General Meeting of the Shareholders on 4 April 2019 we have complied with relevant ethical requirements regarding inde and the duration of our uninterrupted engagement, including previ pendence, and to communicate to them all relationships and other ous renewals and reappointments, is 7 years. matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. PricewaterhouseCoopers, Société coopérative Luxembourg, From the matters communicated with those charged with governance, 29 February 2020 we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are Represented by therefore the key audit matters. We describe these matters in our Gilles Vanderweyen audit report unless law or regulation precludes public disclosure about the matter. ANNUAL REPORT 2019 REPORT ANNUAL SES 94 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2019
Consolidated Income Statement T13 Consolidated Income Statement T13
EUR MILLION 2019 2018 EUR MILLION 2019 2018
Revenue Note 3 1,983.9 2,010.3 Income tax benefit Note 7 76.5 41.9 Profit after tax 276.0 286.7 Cost of sales Note 4 (269.1) (285.8) Staff costs Note 4 (311.7) (305.7) Profit for the year 276.0 286.7 Other operating expenses Note 4 (186.5) (163.3) Operating expenses Note 4 (767.3) (754.8) Attributable to: Owners of the parent 296.2 292.4 EBITDA 1,216.6 1,255.5 Non-controlling interests (20.2) (5.7) 276.0 286.7 Depreciation and impairment expense Note 12 (696.9) (719.0) Amortisation and impairment expense Note 14 (154.3) (145.4) Basic earnings per share (in euro) Operating profit Note 3 365.4 391.1 Class A shares Note 10 0.54 0.54 Class B shares Note 10 0.22 0.22 Finance income Note 6 6.6 16.7 Finance cost Note 6 (172.5) (163.0) Diluted earnings per share (in euro) Net financing costs (165.9) (146.3) Class A shares Note 10 0.54 0.54 Class B shares Note 10 0.22 0.21 Profit before tax 199.5 244.8
The notes are an integral part of the consolidated financial statements. ANNUAL REPORT 2019 REPORT ANNUAL SES 95 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Consolidated Statement of Comprehensive Income T14 Consolidated Statement of Comprehensive Income T14
EUR MILLION 2019 2018 EUR MILLION 2019 2018 Profit for the year 276.0 286.7 Net investment hedge (26.5) (79.1) Income tax effect 6.8 21.2 Other comprehensive income Total net investment hedge, net of tax (19.7) (57.9)
Items that will not be reclassified to profit or loss Net movements on cash flow hedges, net of tax 0.0 1.2 Remeasurements of post-employment benefit obligation (0.9) 0.4 Total net movements on cash flow hedges, net of tax 0.0 1.2 Income tax effect 0.3 (0.2) Remeasurements of post-employment benefit obligation, net of tax (0.6) 0.2 Total items that may be reclassified subsequently to profit or loss 119.9 267.7
Income tax relating to treasury shares impairment charge or reversal 5.8 (6.4) Total other comprehensive income for the year, net of tax 125.1 261.5 Total comprehensive income for the year, net of tax 401.1 548.2 Total items that will not be reclassified to profit or loss 5.2 (6.2) Attributable to: Items that may be reclassified subsequently to profit or loss Owners of the parent 420.5 550.2 Impact of currency translation Note 9 142.5 345.2 Non-controlling interests (19.4) (2.0) Income tax effect Note 9 (2.9) (20.8) 401.1 548.2 Total impact of currency translation, net of tax 139.6 324.4
The notes are an integral part of the consolidated financial statements. ANNUAL REPORT 2019 REPORT ANNUAL SES 96 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CONSOLIDATED STATEMENT Consolidated Statement of Financial Position T15 OF FINANCIAL POSITION EUR MILLION 2019 2018 Equity As at 31 December 2019 Attributable to the owners of the parent Note 20 6,173.4 6,148.4 Non-controlling interests Note 21 83.1 102.2 Total equity 6,256.5 6,250.6
Consolidated Statement of Financial Position T15 Non-current liabilities EUR MILLION 2019 2018 Borrowings Note 23 3,737.2 3,908.5 Non-current assets Provisions Note 24 14.0 16.8 Property, plant and equipment Note 12 5,185.9 5,106.9 Deferred income Note 15 316.6 370.3 Assets in the course of construction Note 13 923.7 907.4 Deferred tax liabilities Note 8 359.5 412.5 Total property, plant and equipment 6,109.6 6,014.3 Other long-term liabilities Note 26 168.2 133.9 Intangible assets Note 14 4,685.2 4,720.5 Lease liabilities Note 29 29.7 28.6 Other financial assets 11.8 6.5 Fixed assets suppliers Note 27 622.5 200.9 Trade and other receivables Note 16 285.5 294.5 Total non-current liabilities 5,247.7 5,071.5 Deferred customer contract costs 17.7 10.3 Deferred tax assets Note 8 260.5 162.3 Current liabilities Total non-current assets 11,370.3 11,208.4 Borrowings Note 23 691.1 476.4 Provisions Note 24 48.6 48.6 Current assets Deferred income Note 15 467.0 476.1 Inventories 30.5 35.1 Trade and other payables Note 25 351.2 367.5 Trade and other receivables Note 16 590.1 614.2 Lease liabilities Note 29 11.2 9.5 Deferred customer contract costs 17.9 17.5 Fixed assets suppliers Note 27 134.8 130.8 Prepayments 62.2 62.8 Derivatives Note 17 0.0 0.1 Derivatives Note 17 - 0.2 Income tax liabilities 25.1 28.2 Income tax receivable 6.9 12.0 Total current liabilities 1,729.0 1,537.2 Cash and cash equivalents Note 19 1,155.3 909.1 Total current assets 1,862.9 1,650.9 Total liabilities 6,976.7 6,608.7
Total assets 13,233.2 12,859.3 Total equity and liabilities 13,233.2 12,859.3 ANNUAL REPORT 2019 REPORT ANNUAL SES The notes are an integral part of the consolidated financial statements. 97 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS Consolidated Statement of Cash Flows T16
For the year ended 31 December 2019 EUR MILLION 2019 2018 Cash flow from investing activities Payments for purchases of intangible assets (26.2) (37.4) Consolidated Statement of Cash Flows T16 Payments for purchases of tangible assets (279.1) (290.8) EUR MILLION 2019 2018 Proceeds from disposals of tangible assets - 11.6 Profit before tax 199.5 244.8 Other investing activities (2.5) (4.2) Net cash absorbed by investing activities (307.8) (320.8)
Taxes paid during the year (54.4) (37.8) Interest expense Note 6 144.2 128.0 Cash flow from financing activities Proceeds from borrowings Note 30 496.7 893.0 Depreciation, amortisation and impairment Notes 12, 14 851.2 864.4 Amortisation of client upfront payments (88.2) (75.8) Repayment of borrowings Note 30 (483.6) (541.7) Other non-cash items in the consolidated income statement 43.2 63.6 Coupon paid on perpetual bond Note 20 (65.6) (65.6) Dividends paid on ordinary shares1 Note 11 (363.9) (362.9) Consolidated operating profit adjusted for non-cash items and tax payments and before working capital changes 1,095.5 1,187.2 Interest paid on borrowings (153.7) (152.3) Payments for acquisition of treasury shares (50.1) (15.9) Changes in working capital, net of business combinations effect Proceeds from treasury shares sold and exercise of stock options 56.5 28.8 (Increase)/decrease in inventories 5.7 (5.2) Lease payments Note 29 (13.4) (9.5) Increase in trade and other receivables (64.2) (39.0) Other financing activities (0.3) (5.7) Increase in prepayments and deferred charges (21.7) (33.4) Net cash absorbed by financing activities (577.4) (231.8) Increase in trade and other payables 63.0 70.0 Increase in upfront payments and deferred income 55.8 11.7 Net foreign exchange movements (2.7) 0.8 Changes in working capital 38.6 4.1 Net increase in cash 246.2 639.5 Cash and cash equivalents at beginning of the year Note 19 909.1 269.6 Net cash generated by operating activities 1,134.1 1,191.3 Cash and cash equivalents at end of the year Note 19 1,155.3 909.1
1 Dividends are presented net of dividends received on treasury shares of EUR 4.3 million (2018: EUR 5.3 million)
ANNUAL REPORT 2019 REPORT ANNUAL The notes are an integral part of the consolidated financial statements. SES 98 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the year ended 31 December 2019
Consolidated Statement of Changes in Shareholders’ Equity T17
Attributable to owners of the parent
Foreign currency Non- Share Treasury Perpetual Other Retained translation controlling EUR MILLION Issued capital premium shares bond reserves2 earnings reserve Total interest Total equity At 1 January 2019 719.0 1,635.5 (132.1) 1,300.0 2,673.5 278.6 (326.1) 6,148.4 102.2 6,250.6 Result for the year - - - - - 296.2 - 296.2 (20.2) 276.0 Other comprehensive income - - - - 5.2 - 119.1 124.3 0.8 125.1 Total comprehensive income (loss) for the year - - - - 5.2 296.2 119.1 420.5 (19.4) 401.1 Allocation of 2018 result - - - - 278.6 (278.6) - - - - Coupon on perpetual bond (Note 20) - - - - (65.6) - - (65.6) - (65.6) Tax on perpetual bond coupon (Note 20) - - - - 18.0 - - 18.0 - 18.0 Dividends provided for or paid1 - - - - (363.9) - - (363.9) - (363.9) Acquisition of treasury shares - - (50.1) - - - - (50.1) - (50.1) Share-based compensation expense - - - - 9.6 - - 9.6 - 9.6 Exercise of share-based compensation - - 18.1 - (36.0) - - (17.9) - (17.9) Sale of treasury shares - - 74.1 - - - - 74.1 - 74.1 Other movements - - - - 0.3 - - 0.3 0.3 0.6 At 31 December 2019 719.0 1,635.5 (90.0) 1,300.0 2,519.7 296.2 (207.0) 6,173.4 83.1 6,256.5
1 Dividends are presented net of dividends received on treasury shares of EUR 4.3 million. 2 The non-distributable items included in other reserves are described in note 20.
The notes are an integral part of the consolidated financial statements. ANNUAL REPORT 2019 REPORT ANNUAL SES 99 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the year ended 31 December 2018
Consolidated Statement of Changes in Shareholder’s Equity T18
Attributable to owners of the parent
Foreign currency Non- Share Treasury Perpetual Other Retained Cash flow translation controlling EUR MILLION Issued capital premium shares bond reserves earnings hedge reserve reserve Total interest Total equity At 1 January 2018 719.0 1,635.5 (160.0) 1,300.0 2,487.0 596.1 (0.8) (588.9) 5,987.9 124.6 6,112.5 Changes in accounting policies1 - - - - - (14.3) - - (14.3) - (14.3) Restated total equity at 1 January 2018 719.0 1,635.5 (160.0) 1,300.0 2,487.0 581.8 (0.8) (588.9) 5,973.6 124.6 6,098.2 Result for the year - - - - - 292.4 - - 292.4 (5.7) 286.7 Other comprehensive income (loss) - - - - (6.2) - 1.2 262.8 257.8 3.7 261.5 Total comprehensive income (loss) for the year - - - - (6.2) 292.4 1.2 262.8 550.2 (2.0) 548.2 Allocation of 2017 result - - - - 233.2 (233.2) - - - - - Coupon on perpetual bond (Note 20) - - - - (65.6) - - - (65.6) - (65.6) Tax on perpetual bond coupon (Note 20) - - - - 18.8 - - - 18.8 - 18.8 Dividends provided for or paid2 - - - - - (362.9) - - (362.9) (6.2) (369.1) Acquisition of treasury shares - - (15.9) - - - - - (15.9) - (15.9) Share-based compensation expense - - - - 12.0 - - - 12.0 - 12.0 Exercise of share-based compensation - - 9.4 - (13.3) - - - (3.9) - (3.9) Sale of treasury shares - - 34.4 - - - - - 34.4 - 34.4 Transactions with non-controlling interests (Note 21) - - - - 7.6 - - - 7.6 (14.2) (6.6) Other movements - - - - - 0.5 (0.4) - 0.1 - 0.1 At 31 December 2018 719.0 1,635.5 (132.1) 1,300.0 2,673.5 278.6 - (326.1) 6,148.4 102.2 6,250.6
1 Represents the impact of the adoption of new International Financial Reporting Standards adopted and applied from 1 January 2018: IFRS 9 “Financial Instruments”, IFRS 15 “Revenue from Contracts with Customers” and IFRS 16 “Leases”. ANNUAL REPORT 2019 REPORT ANNUAL 2 Dividends are presented net of dividends received on treasury shares of EUR 5.2 million SES The notes are an integral part of the consolidated financial statements. 100 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
The consolidated financial statements have been prepared on a his 3) Annual improvements to IFRS Standards 2015-2017 NOTES TO THE torical cost basis, except where fair value is required by IFRS. applicable for periods on or after 1 January 2019 The annual improvements include minor amendments affecting CONSOLIDATED CHANGES IN ACCOUNTING POLICIES IFRS 3, “Business combinations”, IFRS 11, “Joint arrangements”, IAS 12, “Income taxes”, and IAS 23, “Borrowing costs”. The adop FINANCIAL The accounting policies adopted are consistent with those of the pre tion of these improvements did not have any material impact on vious financial year, except for the following new and amended IFRS, the Group’s consolidated financial statements. STATEMENTS effective from 1 January 2019 and adopted by the Group: 4) IFRIC 23, Uncertainty over income tax treatments 1) Amendments to IFRS 9, “Financial instruments” on In June 2017, the IASB issued IFRIC 23 which clarifies how the 31 December 2019 modification of financial liability recognition and measurement requirements of IAS 12 ‘Income This amendment confirms that when a financial liability meas taxes’, are applied where there is uncertainty over income tax ured at amortised cost is modified without this resulting in treatments. The interpretation explains how to recognise and NOTE 1—CORPORATE INFORMATION derecognition, a gain or loss should be recognised immediately measure deferred and current income tax assets and liabilities in profit or loss. The gain or loss is calculated as the difference where there is uncertainty over a tax treatment. The adoption of SES S.A. (‘SES’ or ‘the Company’) was incorporated on 16 March 2001 between the original contractual cash flows and the modified this amendment did not have any material impact on the Group’s as a limited liability company (Société Anonyme) under Luxembourg cash flows discounted at the original effective interest rate. consolidated financial statements. Law. References to ‘the Group’ in the following notes are to the Com pany and its subsidiaries. SES trades under ‘SESG’ on the Luxembourg The adoption of this amendment did not have any impact on the 5) Amendments to IAS 28, “Investments in Associates Stock Exchange and Euronext, Paris. Group’s consolidated financial statements. and Joint Ventures” on long-term interests in associates and joint ventures The consolidated financial statements of SES as at and for the year 2) Amendments to IAS 19, “Employee benefits” on plan The amendments clarify the accounting for long-term interests ended 31 December 2019 were authorised for issue in accordance amendment, curtailment or settlement in an associate or joint venture, which in substance form part of with a resolution of the Board of Directors on 29 February 2020. Under These amendments require an entity to use updated assump the net investment in the associate or joint venture, but to which Luxembourg Law, the consolidated financial statements are approved tions to determine current service cost and net interest for the equity accounting is not applied. In such cases, entities must by the shareholders at their Annual General Meeting. remainder of the period after a plan amendment, curtailment or account for these interests under IFRS 9 before applying the loss settlement; and recognise in profit or loss as part of past service allocation and impairment requirements in IAS 28. NOTE 2—SUMMARY OF SIGNIFICANT cost, or a gain or loss on settlement, any reduction in a surplus, ACCOUNTING POLICIES even if that surplus was not previously recognised because of The adoption of this amendment did not have any material the impact of the asset ceiling. The adoption of this amendment impact on the Group’s consolidated financial statements. BASIS OF PREPARATION did not have any impact on the Group’s consolidated financial statements. The consolidated financial statements have been prepared in com pliance with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’) and endorsed ANNUAL REPORT 2019 REPORT ANNUAL by the European Union (‘IFRS’), as at 31 December 2019. SES 101 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
BASIS OF CONSOLIDATION INVESTMENTS IN ASSOCIATES The Group ceases to use the equity method of accounting on the date from which it no longer has significant influence over the associate, or The consolidated financial statements comprise the financial state The Group accounts for investments in associates using the equity when the interest becomes classified as an asset held for sale. ments of the Company and its controlled subsidiaries, after the elim method of accounting. An associate is an entity in which the Group ination of all material inter-company transactions. Subsidiaries are has significant influence but not control or joint control. SIGNIFICANT ACCOUNTING JUDGMENTS AND fully consolidated from the date the Company obtains control until ESTIMATES such time as control ceases. Acquisitions of subsidiaries are accounted Under the equity method, the investment in the associate is carried for using the purchase method of accounting. The financial state in the statement of financial position at cost plus post-acquisition 1) Judgments ments of subsidiaries are generally prepared for the same reporting changes in the Group’s share of the profit or loss of the associate. In the process of applying the Group’s accounting policies, period as the Company, using consistent accounting policies. If Goodwill relating to an associate is included in the carrying amount management has made the following judgments, apart from required, adjustments are made to align any dissimilar accounting of the investment and is not amortised. those involving estimations, which have the most significant policies that may exist. For details regarding the subsidiaries included effect on the amounts recognised in the financial statements: in the consolidated financial statements ›› see note 33. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. (i) Treatment of orbital slot licence rights Total comprehensive income or loss incurred by a subsidiary is attrib If this is the case, the Group calculates the amount of impairment as The Group’s operating companies have obtained rights to uted to the non-controlling interest even if that results in a deficit the difference between the recoverable amount of the associate and operate satellites at certain orbital locations and using certain balance. its carrying value and recognises the amount within ‘Share of associ frequency bands. These licences are obtained through appli ates’ result’ in the consolidated income statement. cation to the relevant national and international regulatory Should a change in the ownership interest in a subsidiary occur, with authorities and are generally made available for a defined period. out a loss of control, this is accounted for as an equity transaction. The Group’s share of post-acquisition profit or loss is recognised in the Where the Group has obtained such rights through the acquisi consolidated income statement, and its share of post-acquisition move tion of subsidiaries, the rights have been identified as an asset Should the Group cease to have control, any retained interest in the ments in other comprehensive income is recognised in other compre acquired and recorded at the fair value attributed to the asset entity is re-measured to its fair value at the date when control is lost, hensive income with a corresponding adjustment to the carrying at the time of the acquisition as a result of purchase accounting with the change in carrying amount recognised in profit or loss. The amount of the investment. When the Group’s share of losses in an asso procedure. fair value is the initial carrying amount for the purposes of subse ciate equals or exceeds its interest in the associate, including any other quently accounting for the retained interest as an associate, joint unsecured receivables, the Group does not recognise further losses, In the cases when, on the expiry of such rights, management venture or financial asset. In addition, any amounts previously recog unless it has incurred legal or constructive obligations or made pay believes it will be able to successfully re-apply for their usage at nised in other comprehensive income in respect of that entity are ments on behalf of the associate. In general, the financial statements insignificant incremental cost, such rights are deemed to have accounted for as if the Group had directly disposed of the related of associates are prepared for the same reporting year as the parent an indefinite life. Hence these assets are not amortised, but assets or liabilities. This may mean that amounts previously recog company, using consistent accounting policies. If required, adjustments rather are subject to regular impairment reviews to confirm that nised in other comprehensive income are reclassified to profit or loss. are made to align any dissimilar accounting policies that may exist. the carrying value in the Group’s financial statements is still appropriate. More details are given in ›› note 14. Non-controlling interests in the results and equity of subsidiaries are Profits and losses resulting from upstream and downstream transactions presented separately in the consolidated income statement, state between the Group and its associates are recognised in the Group’s ment of comprehensive income, statement of changes in equity and financial statements only to the extent of unrelated investor’s interests ANNUAL REPORT 2019 REPORT ANNUAL statement of financial position respectively. in the associates. Dilution gains and losses arising in investments in
SES associates are recognised in the consolidated income statement. 102 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
(ii) Taxation as the effective control to appoint or remove the majority As a result of the Proxy Agreement, certain limitations are placed The Group operates in numerous tax jurisdictions and manage of the members of the Board of Directors. The entity is on the information which may be shared, and the interaction ment is required to assess tax issues and exposures across its therefore consolidated with a 65% non-controlling interest which may occur, between SES GS and other Group companies. entire operations and to accrue for potential liabilities based on ›› see note 21. The Proxy Holders, besides acting as directors of SES GS, are its interpretation of country-specific tax law and best estimates. entitled to vote in the context of a trust relationship with SES on In conducting this review management assesses the magnitude • LuxGovSat S.A. whose basis their activity is performed in the interest of SES’s of the issue and the likelihood, based on experience and special SES and the Luxembourg government jointly incorporated shareholders and of US national security. ist advice, as to whether it will result in a liability for the Group. the legal entity LuxGovSat S.A. (‘LuxGovSat’) as a limited If this is deemed to be the case, then a provision is recognised liability company (Société Anonyme) under Luxembourg SES’s assessment of the effective control over the relevant for the potential taxation charges. More details are given in law. The Luxembourg government and SES subscribed activities of SES GS encompassed the activities of operating and ›› notes 7 and 24. equally in the equity of the new company. Management has capital decision making, the appointment and remuneration of concluded that the Group controls LuxGovSat, as SES has key management, and the exposure to the variability of financial One significant area of management’s judgement is around trans effective control over the relevant activities of the entity. returns based on the financial performance of SES GS. fer pricing. Whilst the Group employs dedicated members of staff It is therefore consolidated with a 50% non-controlling to establish and maintain appropriate transfer pricing structures interest ›› see note 21. Based on this assessment, SES concluded that, from an IFRS 10 and documentation, judgement still needs to be applied and perspective, SES has and is able to exercise power over the hence potential tax exposures can be identified in the different (iv) SES Government Solutions, Inc. relevant activities of SES GS and has an exposure to variable jurisdictions where the Group operates. The Group, as part of its SES Government Solutions, Inc., USA (‘SES GS’) is subject to returns from its involvement in SES GS, therefore controls the overall assessment of liabilities for taxation, reviews in detail the specific governance rules and is managed through a Proxy entity. transfer pricing structures in place and records provisions where Agreement agreed with the Defense Security Service (‘DSS’) this seems appropriate on a case by case basis. department of the US Department of Defense (‘DOD’). The DSS 2) Estimation uncertainty is a governmental authority responsible for the protection of The key assumptions concerning the future and other key (iii) Consolidation of entities in which the Group holds 50% information deemed classified or sensitive with respect to the sources of estimation uncertainty at the reporting date, that have or less national security of the United States of America which is being a significant risk of causing a material adjustment to the carry shared with industries. A proxy agreement is an instrument ing amounts of assets and liabilities within the next financial • Al Maisan Satellite Communication LLC intended to mitigate the risk of foreign ownership, control or year(s), are described below. The Group based its assumptions (trading as ‘Yahlive’) influence when a foreign person acquires or merges with a US and estimates on parameters available when the consolidated Management has concluded that the Group controls Al Mai entity that has a facility security clearance. A proxy agreement financial statements were prepared. Existing circumstances and san Satellite Communication LLC (‘Al Maisan’), even though conveys a foreign owner’s voting rights to proxy holders, com assumptions about future developments, however, may change it holds 35% economic interest in this subsidiary, since it has prising the proxy board. Proxy holders are cleared US citizens due to market changes or circumstances arising beyond the con the majority of the voting rights on the Board of Directors approved by the DSS. trol of the Group. Such changes are reflected in the assumptions of Al Maisan and there is no other effective control owning when they occur. potential voting rights that could affect SES’ control. The DSS required that SES GS enter into a proxy agreement because it is indirectly owned by SES and SES GS has contracts (i) Impairment testing for goodwill and other SES has effective control over the relevant activities of with the DOD which contain classified information. The Proxy indefinite-life intangible assets ANNUAL REPORT 2019 REPORT ANNUAL Al Maisan, such as budget approval, appointment and Agreement enables SES GS to participate in such contracts with The Group determines whether goodwill and other indefinite-life
SES removal of the CEO and senior management team as well the US Government despite being owned by a non-US corporation. intangible assets are impaired at least on an annual basis. This 103 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
requires an estimation of the value in use of the cash generating (iv) Expected credit losses on trade receivables and The excess of the: units (‘CGUs’) to which the goodwill and other indefinite-life unbilled accrued revenue intangible assets are allocated. Establishing the value in use The Group estimates expected credit losses on trade receivables • consideration transferred; requires the Group to make an estimate of the expected future and unbilled accrued revenue using a provision matrix based on • amount of any non-controlling interest in the acquired entity; and pre-tax cash flows from the CGU and also to choose a suitable loss expectancy rates and forward-looking information. The • acquisition-date fair value of any previous equity interest in the pre-tax discount rate and terminal growth rate in order to calcu Group records additional losses if circumstances or forward- acquired entity; late the present value of those cash flows. More details are given looking information cause the Group to believe that additional in ›› note 14. collectability risk exists that is not reflected in the loss over the fair value of the net identifiable assets acquired is recorded expectancy rates. as goodwill. If those amounts are less than the fair value of the net (ii) Impairment testing for space segment assets identifiable assets of the business acquired, the difference is recog The Group assesses at each reporting date whether there is any BUSINESS COMBINATIONS nised directly in profit or loss as a bargain purchase. indicator that an asset may be impaired. If any such indication exists, the Group determines an estimate of the recoverable Business combinations are accounted for using the acquisition Where settlement of any part of cash consideration is deferred, the amount, as the higher of: (1) the fair value less cost of disposal method. The consideration transferred for the acquisition of the amounts payable in the future are discounted to their present value and, (2) its value in use, to determine whether the recoverable subsidiary is measured as the aggregate of the: as at the date of exchange. amount exceeds the carrying amount included in the consolidated financial statements. As far as this affects the Group’s satellite • fair value of the assets transferred; If the business combination is achieved in stages, the acquisition date assets, the estimation of the value in use requires estimations of • liabilities incurred to the former owners of the acquired business; carrying value of the Group’s previously held equity interest in the the future commercial revenues to be generated by each satellite, • equity interests issued by the Group; acquiree is remeasured to fair value at the acquisition date through particularly related to new markets or services, and also the • fair value of any asset or liability resulting from a contingent con profit or loss. impact of past in-orbit anomalies and their potential impact on sideration agreement; and the satellite’s ability to provide its expected commercial service. • fair value of any pre-existing equity interest in the subsidiary. Any contingent consideration to be transferred by SES will be recognised at fair value at the acquisition date. Subsequent changes to the fair value (iii) Recoverability of deferred tax assets For each business combination, SES measures the non-controlling of the contingent consideration which is deemed to be an asset, or a lia The Group recognises deferred tax assets primarily in connec interest in the acquiree either at fair value or at the proportionate bility, will be recognised in profit or loss. tion with the carry forward of unused tax losses and tax credits. share of the acquiree’s identifiable net assets. The Group reviews the tax position in the different jurisdictions PROPERTY, PLANT AND EQUIPMENT in which it operates to assess the need to recognise such assets Acquisition costs incurred are expensed and included in other oper based mainly on projections of taxable profits to be generated ating expenses. Property, plant and equipment is initially recorded at historical cost, in each of those jurisdictions. The carrying amount of any representing either the acquisition or manufacturing cost. Satellites deferred tax assets is reviewed at each reporting date and When the Group acquires a business, it assesses the financial assets cost includes the launcher and launch insurance, less depreciation reduced to the extent that current projections indicate that it is acquired and liabilities assumed for appropriate classification and and impairment losses. no longer probable that sufficient taxable profits will be available designation in accordance with the contractual terms, economic cir to enable all or part of these assets to be recovered. cumstances and pertinent conditions as at the acquisition date. The financial impact of changes resulting from a revision of manage Assets acquired, and liabilities assumed, are recognised at fair value. ment’s estimate of the cost of property, plant and equipment is recog ANNUAL REPORT 2019 REPORT ANNUAL nised in the consolidated income statement in the period concerned. SES 104 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Right-of-use assets are measured at cost comprising the following: ASSETS IN THE COURSE OF CONSTRUCTION INTANGIBLE ASSETS
• the amount of the initial measurement of lease liability; This caption includes satellites under construction. Incremental costs 1) Goodwill • any lease payments made at or before the commencement date of directly attributable to the purchase of satellites and bringing the Goodwill is measured as described in accounting policy for busi the lease, less any lease incentives received; asset in the condition and location to be used as intended by man ness combinations in ›› note 2. • any initial direct costs; and agement, such as launch costs and other related expenses such as • restoration costs. ground equipment and borrowing costs, are capitalised as part of the After initial recognition, goodwill is measured at cost less any cost of the asset. accumulated impairment losses. For the purpose of impairment Payments associated with short-term leases and leases of low-value testing, goodwill, from the acquisition date, is allocated to each assets are recognised on a straight-line basis as an expense in profit The cost of satellite construction may include an element of deferred of the Group’s CGUs that are expected to benefit from the com or loss. Short-term leases are leases with a lease term of 12 months consideration to satellite manufacturers referred to as satellite per bination, irrespective of whether other assets or liabilities of the or less. Low-value assets comprise IT-equipment and small items of formance incentives. SES is contractually obligated to make these Group are assigned to those units. office furniture. payments over the lives of the satellites, provided the satellites con tinue to operate in accordance with contractual specifications. His The carrying value of acquisition goodwill is not amortised, but Costs for the repair and maintenance of these assets are recorded as torically, the satellite manufacturers have earned substantially all of rather is tested for impairment annually, or more frequently if an expense. these payments. Therefore, SES accounts for these payments as required to establish whether the value is still recoverable. The deferred financing, capitalising the present value of the payments as recoverable amount is defined as the higher of: (1) fair value less Property, plant and equipment is depreciated using the straight-line part of the cost of the satellites and recording a corresponding liabil costs to sell and, (2) value in use. Impairment charges are method, generally based on the following useful lives: ity to the satellite manufacturers. Interest expense is recognised on recorded in the consolidated income statement. Impairment the deferred financing and the liability is accreted based on the pas losses relating to goodwill cannot be reversed in future periods. Asset lives T19 sage of time and reduced as the payments are made. Buildings 25 years The Group estimates value in use based on the estimated dis Space segment assets 10 to 18 years Once the asset is subsequently put into service and ready to operate counted cash flows to be generated by a CGU using five-year Ground segment assets 3 to 15 years in the manner intended by management, the expenditure is trans business plans approved by the Board of Directors. Beyond a five- Other fixtures, fittings, tools and equipment 3 to 15 years ferred to assets in use and depreciation commences. year period, cash flows are generally estimated on the basis of stable rates of growth or decline, although longer periods may be Right-of-use assets 6 to 12 years BORROWING COSTS considered where relevant to accurately calculate the value in use.
An item of property, plant and equipment is derecognised upon dis Borrowing costs that are directly attributable to the construction or Where goodwill forms part of a CGU and part of the operation posal or when no future economic benefits are expected from its use production of a qualifying asset are capitalised during the construc within that unit is disposed of, then the goodwill associated with or disposal. Any gain or loss arising on the derecognition of an asset tion period as part of the cost of the asset. All other borrowing costs the operation disposed of is included in the carrying amount of is included in the consolidated income statement in the period the are recognised as an expense in the period in which they are incurred. the operation when determining the gain or loss on its disposal. asset is derecognised. Goodwill disposed of in this situation is measured based on the relative values of the operation disposed of and the portion of The residual values, remaining useful lives and methods of deprecia the CGU unit retained. ANNUAL REPORT 2019 REPORT ANNUAL tion of property, plant and equipment are reviewed at each financial
SES year end and adjusted where necessary. 105 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
2) Other intangibles • it can be demonstrated how the software product will generate INVESTMENTS AND OTHER FINANCIAL (i) Orbital rights probable future economic benefits; ASSETS Intangible assets consist principally of rights of usage of orbital • adequate technical, financial and other resources to complete frequencies. The Group is authorised by governments to operate the development and to use or sell the software product are The Group classifies its financial assets in the following measurement satellites at certain orbital locations. Governments acquire rights available; and categories: to these orbital locations through filings made with the Inter • the expenditure attributable to the software product during its national Telecommunication Union (‘ITU’), a sub-organisation of development can be reliably measured. • those to be measured subsequently at fair value through profit or the United Nations. The Group will continue to have rights to loss; and operate at its orbital locations so long as it maintains its authori Directly attributable costs that are capitalised as part of the software • those to be measured at amortised cost. sations to do so. Those rights are reviewed at acquisition to product include the software development employee costs and an establish whether they represent assets with a definite or indefi appropriate portion of relevant overheads. At initial recognition, the Group measures a financial asset at its fair nite life. Those assessed as being definite life assets are amor value plus, in the case of a financial asset not remeasured to fair value tised on a straight-line basis over their estimated useful life not Other development expenditures that do not meet these criteria are through the income statement, transaction costs that are directly exceeding 30 years. recognised as an expense as incurred. Development costs previously attributable to the acquisition of the financial asset. Transaction costs recognised as an expense are not recognised as an asset in a sub of financial assets carried at fair value and revalued through the Indefinite-life intangible assets are held at cost and are subject sequent period. income statement are expensed in the period when they were to impairment testing in line with the treatment outlined for incurred. goodwill above. Assets with indefinite lives are reviewed annually Computer software development costs recognised as assets are to determine whether the indefinite life assessment continues amortised over their estimated useful life, not exceeding seven years. All regular purchases and sales of financial assets are recognised on to be supportable. If not, the change in the useful life assessment the date that the Group is committed to the purchase or sale of the from indefinite to finite is made on a prospective basis. Orbital IMPAIRMENT OF OTHER INTANGIBLE ASSETS asset. rights acquired for a non-cash consideration are initially meas AND PROPERTY, PLANT AND EQUIPMENT ured at the fair value of the consideration given. Financial assets with embedded derivatives are considered in their The Group assesses at each reporting date whether there is an entirety when determining whether their cash flows are solely pay (ii) Software and development costs indication that the carrying amount of the assets may not be recov ment of principal and interest. Costs associated with maintaining computer software pro erable. If such indication exists, the recoverable amount of the asset grammes are recognised as an expense as incurred. Develop or CGU is reviewed in order to determine the amount of the impair Equity investments ment costs that are directly attributable to the design and test ment, if any. Unless SES has significant influence, the Group measures all equity ing of identifiable and unique software products controlled by investments at fair value. Changes in the fair value of financial assets the Group are recognised as intangible assets when the following Impairments can arise from complete or partial failure of a satellite as are recognised in the consolidated income statement. criteria are met: well as other changes in expected discounted future cash flows. Such impairment tests are based on a recoverable value determined using • it is technically feasible to complete the software product so that estimated future cash flows and an appropriate discount rate. The it will be available for use; estimated cash flows are based on the most recent business plans. If • management intends to complete the software product and use an impairment is identified, the carrying value will be written down to ANNUAL REPORT 2019 REPORT ANNUAL or sell it; its recoverable amount.
SES • there is an ability to use or sell the software product; 106 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
DEFERRED CUSTOMER CONTRACT COSTS PREPAYMENTS Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and excludes Deferred customer contract costs include cost of equipment provided Prepayments represent expenditures paid during the financial year amounts collected on behalf of third parties. The Group recognises rev to customers under the terms of their service agreements and but relating to a subsequent financial year. The prepaid expenses enue when or as it transfers control of a good or service to a customer. expensed over the term of those contracts. include mainly insurance, rental of third-party satellite capacity, advertising expenses as well as loan origination costs related to loan Contract modifications are accounted for either as a separate con INVENTORIES facilities which have not been drawn. tract or as part of the existing contract, depending on the nature of the modification. The Group accounts for a modification as a separate Inventories primarily consist of equipment held for re-sale, work-in- TREASURY SHARES contract if: progress, related accessories and network equipment spares and are stated at the lower of cost or net realisable value, with cost deter Treasury shares are mostly acquired by the Group in connection with • the scope of the contract increases because of the addition of dis mined on a weighted average-cost method. share-based compensation plans and are presented as a set off to tinct services, and; equity in the consolidated statement of financial position. Gains and • the price of the contract increases by an amount of consideration Net realisable value is the estimated selling price in the ordinary losses on the purchase, sale, issue or cancellation of treasury shares that reflects the stand-alone selling prices of the additional services. course of business less the estimated costs of completion and the are not recognised in the consolidated income statement, but rather estimated costs necessary to make the sale. in the equity. A modification that does not meet the above criteria to be accounted for as a separate contract is accounted for as an adjustment to the TRADE RECEIVABLES CASH AND CASH EQUIVALENTS existing contract, either prospectively or through a cumulative catch-up adjustment. The determination depends on whether the Trade receivables are recognised initially at fair value and subse Cash and cash equivalents comprise cash at banks and on hand, remaining services to be provided to the customer under the modi quently measured at amortised cost using the effective interest deposits and short-term, highly liquid investments readily convertible fied contract are distinct from those already provided. method, less provision for impairment. For impairment of trade receiv to known amounts of cash and subject to insignificant risk of changes ables, the Group estimates expected lifetime losses that would typi in value. Cash on hand and in banks and short-term deposits which Where a contract contains elements of variable consideration, the cally be carried for each receivable based on the credit risk class upon are held to maturity are carried at fair value. Group estimates the amount of variable consideration to which it will the initial recognition of the receivables. Expected lifetime losses be entitled under the contract. Variable consideration can arise, for are estimated based on historical financial information as well as REVENUE RECOGNITION example, as a result of variable prices, incentives or other similar items. forward-looking data. Additional provisions are recognised when there Variable consideration is only included in the transaction price if, and is objective evidence that the Group will not be able to recover a Revenues are generated predominantly from customer service agree to the extent that, it is highly probable that its inclusion will not result specific debt. The Group evaluates the credit risk of its customers on ments for the provision of satellite capacity over contractually agreed in a significant revenue reversal in the future when the uncertainty an ongoing basis. periods, including short-term occasional use capacity, with the asso has been subsequently resolved. ciated uplinking and downlinking services as appropriate. Other ser TRADE AND OTHER PAYABLES vices generating revenue mainly include: sale of customer equipment; Revenue from provision of satellite capacity platform services; subscription revenue; income received in connec For the Group’s contracts to provide satellite capacity, the Group Trade and other payables are initially recognised at fair value, and tion with satellite interim missions; installation and other engineering makes capacity available to customers in a series of time periods that subsequently carried at amortised cost using the effective interest services and proceeds from the sale of transponders if the revenue are distinct and have the same pattern of transfer to the customer. ANNUAL REPORT 2019 REPORT ANNUAL method. recognition criteria for the transaction are met. Revenue from customers under service agreements for satellite
SES capacity is recognised on a straight-line basis over the duration of 107 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
the respective contracts, including any free-of-charge periods. Using OTHER INCOME Provisions are measured at the present value of management’s best a straight-line measure of progress most faithfully depicts the Group’s estimate of the expenditure required to settle the present obligation performance because the Group makes available a consistent level Other income arising from settlements under insurance claims and at the end of the reporting period. of capacity over each distinct time period. Revenue will cease to be decreases in provisions for in-orbit incentives are recognised when recognised if there is an indication of a significant deterioration in a they are virtually certain of being realised. Other income is presented BORROWINGS customer’s ability to pay for the remaining goods or services. as part of revenue due to their relative insignificance. Borrowings are recognised initially at fair value, net of transaction Subscription revenue CONTRACT ASSETS AND CONTRACT costs incurred. Borrowings are subsequently carried at amortised cost; The subscription revenue related to HD Plus services is recorded on LIABILITIES any difference between the proceeds (net of transaction costs) and a linear basis over the term of the subscription agreement. the redemption value is recognised in the consolidated income state Assets and liabilities related to contracts with customers include trade ment over the period of the borrowings using the effective interest Proceeds from sale of transponders receivables, unbilled accrued revenue, deferred customer contract method. The proceeds of transponder sales are recognised in the period of costs, and deferred income. the transaction at the time the Group transfers control of the transpond Fees paid on the establishment of loan facilities are recognised as ers, which generally corresponds to the timing of transfer of title and Customer payments received in advance of the provision of service transaction costs of the loan to the extent that it is probable that risks and rewards associated with the holding of the transponders. are recorded as contract liabilities and presented as ‘deferred income’ some or all of the facility will be drawn down. In this case, the fee is in the statement of financial position, and for significant advance pay deferred until the draw-down occurs. Non-cash consideration ments, interest is accrued on the amount received at the effective The Group occasionally receives non-cash consideration as part of a interest rate at the time of receipt. CURRENT TAXES revenue transaction. The Group measures non-cash consideration at fair value unless it is unable to reasonably estimate fair value, in which The unbilled portion of recognised revenues is recorded as contract Current tax assets and liabilities for current and prior periods are case the Group measures the consideration indirectly based on the stan assets and presented as ‘unbilled accrued revenue’ within ‘Trade and measured at the amount expected to be recovered from, or paid to, dalone selling price of the goods or services promised to the customer. other receivables’, allocated between current and non-current as the tax authorities. The tax rates and laws used to compute these appropriate. amounts are those enacted, or substantively enacted, at the report Revenue generated by the engineering services ing date. For engineering services, the Group recognises revenue over time on DIVIDENDS a basis reflecting the costs incurred to date relative to the total costs DEFERRED TAXES expected to be incurred. The Company declares dividends after the financial statements for the year have been approved. Accordingly, dividends are recorded in Deferred tax is determined using the liability method on temporary LEASE INCOME the subsequent year’s financial statements. differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Lease income from operating leases where the Group is lessor is rec PROVISIONS ognised on a straight-line basis over the lease term. The respective Deferred tax liabilities are recognised for all taxable temporary differ right-of use assets are included in the balance sheet based on their Provisions are recognised when the Group has a present legal or con ences, except: nature. structive obligation as a result of a past event and it is probable that ANNUAL REPORT 2019 REPORT ANNUAL an outflow of resources embodying economic benefits will be required • where the deferred tax liability arises from the initial recognition of
SES to settle the obligation and the amount can be reliably estimated. goodwill or of an asset or liability in a transaction that is not a busi 108 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
ness combination and, at the time of the transaction, affects nei Deferred taxes are classified according to the classification of the neither planned nor likely to occur in the foreseeable future is, in sub ther the accounting profit nor taxable profit or loss; and underlying temporary difference either as an asset or a liability, or in stance, a part of the entity’s net investment in that foreign operation. • in respect of taxable temporary differences associated with invest other comprehensive income or directly in equity. The related foreign exchange differences and income tax effect of ments in subsidiaries where the timing of the reversal of the tem the foreign exchange differences are included in the foreign currency porary differences can be controlled and it is probable that the Tax benefits acquired as part of a business combination, but not sat translation reserve within equity. On disposal of a foreign operation, temporary differences will not reverse in the foreseeable future. isfying the criteria for separate recognition at that date, are recog the deferred cumulative amount recognised in equity relating to that nised subsequently if new information about facts and circumstances particular foreign operation is reclassified to the consolidated income Deferred tax assets are recognised for all deductible temporary dif change. The adjustment is either treated as a reduction in goodwill statement. ferences, carry-forward of unused tax credits and unused tax losses, (as long as it does not exceed goodwill) if it was incurred during the to the extent that it is probable that taxable profit will be available measurement period or recognised in profit or loss. Goodwill and fair value adjustments arising on the acquisition of a against which the deductible temporary differences, and the carry-for foreign entity are treated as assets and liabilities of the foreign entity ward of unused tax credits and unused tax losses can be utilised Deferred tax assets and deferred tax liabilities are offset, if a legally and translated at the closing rate. except: enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity The assets and liabilities of consolidated foreign operations are trans • where the deferred tax asset relating to the deductible temporary and the same taxation authority. lated into euro at the year-end exchange rates, while the income and difference arises from the initial recognition of an asset or liability expense items of these foreign operations are translated at the aver in a transaction that is not a business combination and, at the time TRANSLATION OF FOREIGN CURRENCIES age exchange rate of the year. The related foreign exchange differ of the transaction, affects neither the accounting profit nor taxable ences are included in the foreign currency translation reserve within profit or loss; and The consolidated financial statements are presented in euro (EUR), equity. On disposal of a foreign operation, the deferred cumulative • in respect of deductible temporary differences associated with which is the Company’s functional and presentation currency. Each amount recognised in equity relating to that foreign operation is investments in subsidiaries, deferred tax assets are recognised only entity in the Group determines its own functional currency and items reclassified to the consolidated income statement as part of the gain to the extent that it is probable that the temporary differences will included in the financial statements of each entity are measured using or loss on disposal. reverse in the foreseeable future and taxable profit will be availa that functional currency. ble against which the temporary differences can be utilised. The US dollar exchange rates used by the Group during the year were Transactions in foreign currencies are initially recorded in the entity’s as follows: The carrying amount of deferred tax assets is reviewed at each report functional currency at the exchange rate prevailing at the date of the ing date and reduced to the extent that it is no longer probable that transaction. The cost of non-monetary assets is translated at the rate USD Exchange Rate T20 sufficient taxable profit will be available to allow all or part of the applicable at the date of the transaction. All other assets and liabili Average rate Closing rate Average rate Closing rate deferred tax asset to be utilised. Unrecognised deferred tax assets ties are translated at closing rates of the period. During the year, for 2019 for 2019 for 2018 for 2018 are reassessed at each reporting date and are recognised to the expenses and income expressed in foreign currencies are recorded USD 1.1213 1.1234 1.1838 1.1450 extent that it has become probable that future taxable profit will allow at exchange rates which approximate the rate prevailing on the date the deferred tax asset to be recovered. they occur or accrue. All exchange differences resulting from the application of these principles are included in the consolidated Deferred tax assets and liabilities are measured at the tax rates that income statement. are expected to apply to the year when the asset is realised or the ANNUAL REPORT 2019 REPORT ANNUAL liability is settled, based on tax rates (and tax laws) that have been The Group considers that monetary long-term receivables or loans
SES enacted or substantively enacted at the reporting date. with a subsidiary that is a foreign operation for which settlement is 109 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
BASIC EARNINGS PER SHARE The Group formally documents all relationships between hedging tion is treated as a derecognition of the original liability and the instruments and hedged items, as well as its risk-management objec recognition of a new liability, and the difference in the respective The Company’s capital structure consists of Class A and Class B shares, tive and strategy for undertaking various hedge transactions. This carrying amount is recognised in profit or loss. entitled to the payment of annual dividends as approved by the share process includes allocating all derivatives that are designated as net holders at their annual meetings. Holders of Class B shares participate investment hedges to specific assets and liabilities in the statement Offsetting financial instruments in earnings and are entitled to 40% of the dividends payable per Class of financial position. The Group also formally assesses both at the Financial assets and liabilities are offset, and the net amount A share. Basic earnings per share is calculated by dividing the net profit inception of the hedge and on an ongoing basis, whether each deriva reported in the balance sheet, when there is a legally enforcea attributable to ordinary shareholders, adjusted by deducting the tive is highly effective in offsetting changes in fair values or cash flows ble right to offset the recognised amounts and there is an inten assumed coupon, net of tax, on the perpetual bond, by the weighted of the hedged item. If it is determined that a derivative is not highly tion to settle on a net basis or realise the asset and settle the average number of common shares outstanding during the period as effective as a hedge, or if a derivative ceases to be a highly effective liability simultaneously. The legally enforceable right must not adjusted to reflect the economic rights of each class of shares. hedge, the Group will discontinue hedge accounting prospectively. be contingent on future events and must be enforceable in the The ineffective portion of hedge is recognised in profit or loss. normal course of business and in the event of default, insolvency DILUTED EARNINGS PER SHARE or bankruptcy of the Company or the counterparty. DERECOGNITION OF FINANCIAL ASSETS Diluted earnings per share adjusts the figures used in the determination AND LIABILITIES ACCOUNTING FOR PENSION OBLIGATIONS of basic earnings per share to take into account the weighted average number of additional ordinary shares that would have been outstanding 1) Financial assets The Company and certain subsidiaries operate defined contribution assuming the conversion of all dilutive potential ordinary shares. A financial asset is derecognised where: pension plans.
HEDGE OF A NET INVESTMENT IN A FOREIGN • the right to receive cash flows from the asset has expired; A defined contribution plan is a pension plan under which the Group OPERATION • the Group retains the right to receive cash flows from the asset, pays fixed contributions into a separate entity. The Group has no legal but has assumed an obligation to pay them in full without mate or constructive obligations to pay further contributions if the fund Changes in the fair value of a derivative or non-derivative instrument rial delay to a third party under a ‘pass-through’ arrangement. does not hold sufficient assets to pay all employees the benefits relat that is designated as a hedge of a net investment are recorded in the • the Group has transferred its rights to receive cash flows from ing to employee service in the current and prior periods. foreign currency translation reserve within equity to the extent that it the asset and either: is deemed to be an effective hedge. The ineffective portion is recog For defined contribution plans, the Group pays contributions to pub nised in the consolidated income statement as finance income or cost. a) has transferred substantially all the risks and rewards of the licly or privately administered pension insurance plans on a manda assets; or tory, contractual or voluntary basis. The Group has no further payment Hedge accounting is discontinued when the hedging instrument b) has neither transferred nor retained substantially all the risks and obligations once the contributions have been paid. The contributions expires or is sold, terminated or exercised, the hedge no longer qual rewards of the asset but has transferred control of that asset. are recognised as employee benefit expense when they are due. Pre ifies for hedge accounting, or the Group revokes the designation. At paid contributions are recognised as an asset to the extent that a that point in time, any cumulative gain or loss on the hedging instru 2) Financial liabilities cash refund or a reduction in the future payments is available. ment recognised in equity is kept in equity until the forecasted trans A financial liability is derecognised when the obligation under action occurs. If a hedged transaction is no longer expected to occur, the liability is discharged, cancelled or expired. Where an exist the net cumulative gain or loss recognised in equity is transferred to ing financial liability is replaced by another from the same lender ANNUAL REPORT 2019 REPORT ANNUAL net profit or loss for the period. on substantially different terms, or the terms of an existing lia
SES bility are substantially modified, such an exchange or modifica 110 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
SHARE-BASED PAYMENTS 2) Cash-settled share-based compensation plans • fixed payments (including in-substance fixed payments), less any A liability is recognised for the fair value of cash-settled trans lease incentives receivable; 1) Equity-settled share-based compensation plans actions. The fair value is measured initially at each reporting date • variable lease payments that are based on an index or a rate; Employees (including senior executives) of the Group receive up to and including the settlement date, with changes in fair • amounts expected to be payable by the lessee under residual value remuneration in the form of share-based compensation transac value recognised in employee benefits expense. The fair value is guarantees; tions, whereby employees render services as consideration for expensed over the period until the vesting date with recognition • the exercise price of a purchase option if the lessee is reasonably equity instruments (‘equity-settled transactions’). The cost of of a corresponding liability. The fair value is determined using a certain to exercise that option; and equity-settled transactions is measured by reference to the fair binomial model, further details of which are given in ›› note 22. • payments of penalties for terminating the lease, if the lease term value at the date on which they are granted. The fair value is reflects the lessee exercising that option. determined by an external valuer using a binomial model for the DEEPLY SUBORDINATED FIXED RATE RESET- Stock Appreciation Rights Plan (‘STAR Plan’) and Executive TABLE SECURITIES (“PERPETUAL BOND”) The lease payments are discounted using the interest rate implicit in Incentive Compensation Plan (‘EICP Plan’), and a Black Scholes the lease, if that rate can be determined, or the Group’s incremental Model for the Long-term Incentive Programme (‘LTI’). Further The deeply subordinated fixed rate securities issued by the Company borrowing rate. At the commencement of the lease the Group recog details are given in ›› note 22. In valuing equity-settled transac are classified as equity since the Company has no contractual obliga nises a lease asset and a lease liability. The lease liability is initially tions, no account is taken of any non-market performance con tion to redeem the securities, and coupon payments may be deferred measured at present value of lease payments payable over the lease ditions, the valuation being linked only to the price of the Com under certain circumstances (more details are given in ›› note 20) and term, discounted at rate implicit in the lease. Lease payments are pany’s shares, if applicable. recorded at fair value. Subsequent changes in fair value are not apportioned between the finance charges and reduction of the lease recognised in equity. Coupons become payable whenever the Com liability to achieve a constant rate of interest on the remaining bal The cost of equity-settled transactions is recognised, together pany makes dividend payments. Coupon accruals are considered in ance of the liability. Finance costs are charged directly to expense. with a corresponding increase in equity, over the period in which the determination of earnings for calculating earnings per share ›› see the performance and/or service conditions are fulfilled, ending note 10. In its accounting policies the Group applies the following practical on the date on which the relevant employees become fully expedients: entitled to the award (the vesting date). The cumulative expense LEASES recognised for equity-settled transactions at each reporting date • using a single discount rate to a portfolio of leases with similar until the vesting date reflects the extent to which the vesting The determination as to whether an arrangement is, or contains, a characteristics; and period has expired and the Group’s best estimate of the number lease is based on the substance of the arrangement at inception date, • not accounting for leases ending within 12 months of the date of of equity instruments that will ultimately vest. The consolidated primarily whether the contract conveys the right to control the use the initial application, or the underlying asset has a low value. income statement charge or credit for a period represents the of an identified asset for a period of time in exchange for considera movement in cumulative expense recognised as at the beginning tion. Control is conveyed where the Group has both the right to direct NEW STANDARDS AND INTERPRETATIONS and end of that period. No expense is recognised for awards that the identified asset’s use and to obtain substantially all the economic NOT YET ADOPTED do not ultimately vest. benefits from that use. A number of new standards and amendments to standards and inter The dilutive effect of outstanding options is reflected as addi Assets and liabilities arising from a lease are initially measured on a pretations are relevant for the Group and effective for annual periods tional share dilution in the computation of earnings per share present value basis. Lease liabilities include the net present value of beginning after 1 January 2020, and have not been early adopted in ›› see note 10. the following lease payments: preparing these consolidated financial statements: ANNUAL REPORT 2019 REPORT ANNUAL SES 111 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
1) Amendment to IFRS 3—Definition of a Business 4) Amendments to IAS 1 on classification of liabilities as The following table reconciles net debt to the relevant balance sheet The IASB has issued ‘Definition of a Business (Amendments to current or non-current line items: IFRS 3)’ aimed at resolving the difficulties that arise when an On 23 January 2020, the IASB issued “Classification of Liabilities entity determines whether it has acquired a business or a group as Current or Non-Current (Amendments to IAS 1).” The amend Net Debt T21 of assets. ment will affect the presentation of liabilities in the statement of financial position. The amendment clarifies that the classification EUR MILLION 2019 2018 The amendments are effective for business combinations for of a liability as current or non-current should be based on rights Borrowings—non-current 3,737.2 3,908.5 which the acquisition date is on or after the beginning of the first in existence at the end of the reporting period to defer settle Borrowings—current 691.1 476.4 annual reporting period beginning on or after 1 January 2020. ment of a liability by at least 12 months. The amendment also Borrowings, less 4,428.3 4,384.9 The amendment was not yet endorsed by the EU. clarifies that classification of a liability should be unaffected by Cash and equivalents 1,155.3 909.1 the entity’s expectations regarding whether it will exercise its Net debt 3,273.0 3,475.8 2) Amendment to IAS 1 and IAS 8 on the definition of rights to defer payment. The amendment is effective for annual material reporting periods beginning on 1 January 2022. The amendment The IASB has issued ‘Definition of Material (Amendments to IAS was not yet endorsed by the EU. 1 and IAS 8)’ to clarify the definition of ‘material’ and to align the 2) EBITDA and EBITDA margin definition used in the Conceptual Framework and the standards ALTERNATIVE PERFORMANCE MEASURES EBITDA is defined as profit for the period before the impact of themselves. depreciation, amortisation, net financing cost and income tax. SES regularly uses alternative performance measures to present the EBITDA Margin is defined as EBITDA divided by revenue. The The amendments are effective for annual reporting periods performance of the Group. Group believes that EBITDA and EBITDA margin are useful beginning on or after 1 January 2020. supplemental indicators that may be used to assist in evaluating These measures may not be comparable to similarly titled measures a Company’s operating performance. 3) Amendments to References to the Conceptual used by other companies and are not measurements under IFRS or Framework in IFRS standards any other body of generally accepted accounting principles, and thus The following table reconciles EBITDA to the consolidated income The IASB has published its revised ‘Conceptual Framework for should not be considered substitutes for the information contained statement line items from which it is derived: Financial Reporting’. Included are revised definitions of an asset in the Group’s financial statements. and a liability as well as new guidance on measurement and EBITDA T22 derecognition, presentation and disclosure. The new Conceptual 1) Net debt Framework does not constitute a substantial revision of the doc Net debt is defined as current and non-current borrowings less EUR MILLION 2019 2018 ument as was originally intended when the project was first taken cash and cash equivalents, all as disclosed on the consolidated Profit before tax 199.5 244.8 up in 2004. The Group does not expect any significant impact statement of financial position. The Group believes that net debt Add: Depreciation and impairment expense 696.9 719.0 of these amendments on its consolidated financial statements. is relevant to investors, since it gives an indication of the abso Add: Amortisation and impairment expense 154.3 145.4 lute level of non-equity funding of the business. This can be Add: Net financing costs 165.9 146.3 compared to the income and cash flows generated by the busi EBITDA 1,216.6 1,255.5 ness, and available undrawn facilities. ANNUAL REPORT 2019 REPORT ANNUAL SES 112 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
The following table provides a reconciliation of EBITDA margin: Operating profit margin is defined as operating profit as a percentage NOTE 3—SEGMENT INFORMATION of revenue. SES believes that operating profit margin is a useful EBITDA Margin T23 measure to demonstrate the proportion of revenue that has been The Group does business in one operating segment, namely the realised as operating profit, and therefore an indicator of profitability. provision of satellite-based data transmission capacity, and ancillary EUR MILLION 2019 2018 services, to customers around the world. Revenue 1,983.9 2,010.3 The following table provides a reconciliation of the operating profit EBITDA 1,216.6 1,255.5 margin: The Senior Leadership Team (‘SLT’), which is the chief operating EBITDA Margin (%) 61.3% 62.5% decision-making committee in the Group’s corporate governance Operating Profit Margin T25 structure, reviews the Group’s financial reporting and generates those proposals for the allocation of the Group’s resources, which are sub 3) Operating profit and operating profit margin EUR MILLION 2019 2018 mitted for validation to the Board of Directors. The main sources of Operating profit is defined as profit for the year before the impact Revenue 1,983.9 2,010.3 financial information used by the SLT in assessing the Group’s per of net financing charges, income tax, the Group’s share of the Operating profit 365.4 391.1 formance and allocating resources are: results of associates and includes any extraordinary line item Operating profit margin 18.4% 19.5% between revenue and profit before tax in the Group’s consoli • analysis of the Group’s revenues from its business units SES Video dated income statement. The Group uses operating profit to and SES Networks (comprising the sales verticals Fixed Data, monitor its financial return after both operating expenses and a 4) Net debt to EBITDA ratio Mobility and Government); charge representing the cost of usage of both its property, plant Net debt to EBITDA ratio is defined as net debt divided by • cost and overall Group profitability development; and equipment and definite-life intangible assets. EBITDA. The Group believes that net debt to EBITDA ratio is a • internal and external analyses of expected future developments in useful measure to demonstrate to investors its ability to gener the markets into which capacity is being delivered and of the com The following table reconciles operating profit to the income state ate the income needed to be able to settle its loans and borrow mercial landscape applying to those markets. ment line items from which it is derived: ings as they fall due. When analysing the performance of the single operating segment, the Operating Profit T24 The following table reconciles the net debt to EBITDA ratio to net comparative prior year figures are analysed both as reported and at debt and EBITDA: ‘constant FX’—recomputed using the exchange rates applying for EUR MILLION 2019 2018 each month in the current period. Profit before tax 199.5 244.8 Net Debt to EBITDA Ratio T26 Add: Net financing costs 165.9 146.3 EUR MILLION 2019 2018 Operating profit 365.4 391.1 Net debt 3,273.0 3,475.8 EBITDA 1,216.6 1,255.5 Net debt to EBITDA ratio 2.69 times 2.77 times ANNUAL REPORT 2019 REPORT ANNUAL SES 113 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
The segment’s financial results for 2019 are set out below: REVENUE BY BUSINESS UNIT
Operating Profit Reported T27 As reported and at constant FX, the revenue allocated to the relevant business units developed as follows: Change Favourable EUR MILLION 2019 2018 +/- Adverse Revenue by Business Unit 2019 and 2018 T29 Revenue by Business Unit 2018 and 2017 T30
Revenue 1,983.9 2,010.3 -1.3% Change Change Operating expenses (767.3) (754.8) -1.7% Change Favourable Change Favourable Favourable +/- Adverse Favourable +/- Adverse EBITDA 1,216.6 1,255.5 -3.1% EUR Constant +/- (constant EUR Constant +/- (constant EBITDA margin (%) 61.3% 62.5% -1.9% pts MILLION 2019 2018 FX 2018 Adverse FX) MILLION 2018 2017 FX 2017 Adverse FX) SES Video 1,213.4 1,306.3 1,326.0 -7.1% -8.5% SES Video 1,306.3 1,383.0 1,356.1 -5.5% -3.7% Depreciation and impairment Under Under expense (696.9) (719.0) +3.1% lying 1 1,210.0 1,292.1 1,311.7 -6.4% -7.8% lying 1 1,292.1 1,373.2 1,346.3 -5.9% -4.0% Amortisation and impairment Periodic 2 3.4 14.2 14.3 -76.1% -76.2% Periodic 2 14.2 9.8 9.8 +44.9% +44.9% expense (154.3) (145.4) -6.1% SES Net- SES Net- Operating profit 365.4 391.1 -6.6% works 762.0 695.7 727.5 +9.5% +4.7% works 695.7 646.1 616.1 +7.7% +12.9% Under Under lying 1 734.1 671.1 702.4 +9.4% +4.5% lying 1 671.1 606.6 579.8 +10.6% +15.8% Operating Profit at Constant FX T28 Periodic 2 27.9 24.6 25.2 +13.4% +10.7% Periodic 2 24.6 39.5 36.3 -37.7% -32.3% Constant Change Sub-total 1,975.4 2,002.0 2,053.5 -1.3% -3.8% Sub-total 2,002.0 2,029.1 1,972.2 -1.3% +1.5% FX Favourable Under Under EUR MILLION 2019 2018 +/- Adverse lying 1 1,944.1 1,963.2 2,014.1 -1.0% -3.5% lying 1 1,963.2 1,979.8 1,926.1 -0.8% +1.9% Revenue 1,983.9 2,062.1 -3.8% Periodic 2 31.3 38.8 39.5 -19.3% -20.8% Periodic 2 38.8 49.3 46.1 -21.3% -15.9% Operating expenses (767.3) (775.3) +1.0% Other 3 8.5 8.3 8.6 +2.4% -1.2% Other 3 8.3 5.9 5.2 +40.7% +58.7% EBITDA 1,216.6 1,286.8 -5.5% EBITDA margin (%) 61.3% 62.4% -1.8% pts Group Total 1,983.9 2,010.3 2,062.1 -1.3% -3.8% Group Total 2,010.3 2,035.0 1,977.4 -1.2% +1.7%
1 “Underlying” revenue represents the core business of capacity sales, as well as associated services and equipment. This revenue may be impacted by changes in launch schedule Depreciation and impairment and satellite health status. expense (696.9) (742.6) +6.2% 2 “Periodic” revenue separates revenues that are not directly related to or would distort the underlying business trends. Periodic revenue includes: the outright sale of transponders or transponder equivalents; accelerated revenue from hosted payloads during the course of construction; termination fees; insurance proceeds; certain interim satellite missions Amortisation and impairment and other such items when material expense (154.3) (148.5) -3.9% 3 Other includes revenue not directly applicable to SES Video or SES Networks Operating profit 365.4 395.7 -7.7% ANNUAL REPORT 2019 REPORT ANNUAL SES 114 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
REVENUE BY CATEGORY REVENUE BY COUNTRY PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS BY LOCATION The Group’s revenue analysis from the point of view of category and The Group’s revenue from external customers analysed by country timing can be found below: using the customer’s billing address is as follows: The Group’s property, plant and equipment and intangible assets are located as set out in the following table. Note that satellites are Revenue by Category 2019 T31 Revenue by Country T33 allocated to the country where the legal owner of the asset is incor porated. Revenue EUR MILLION 2019 2018 recognised Revenue at a point recognised Luxembourg (SES country of domicile) 60.3 59.5 Property, Plant and Equipment and EUR MILLION in time over time Total United States of America 628.7 576.0 Intangible Assets by Location T34 Revenue from contracts Germany 385.0 408.1 EUR MILLION 2019 2018 with customers 17.1 1,916.2 1,933.3 United Kingdom 253.1 279.1 Lease income - 43.0 43.0 France 90.6 99.3 Luxembourg (SES country of domicile) 4,821.0 4,566.3 Other income 7.6 - 7.6 Others 566.2 588.3 United States of America 2,790.2 2,808.1 Total 24.7 1,959.2 1,983.9 Total 1,983.9 2,010.3 The Netherlands 1,511.4 1,543.5 Isle of Man 1,178.3 1,204.7 Sweden 163.0 176.7 Revenue by Category 2018 T32 Germany 98.1 94.6 No single customer accounted for 10%, or more, of total revenue in Revenue Israel 83.9 156.3 recognised Revenue 2019, or 2018. Others 148.9 184.6 at a point recognised EUR MILLION in time over time Total Total 10,794.8 10,734.8 Revenue from contracts with customers - 1,906.7 1,906.7 Lease income - 76.8 76.8 Other income 26.8 - 26.8 Total 26.8 1,983.5 2,010.3
Revenue from contracts with customers, recognised at a point in time is related to sale of transponders and amounts to EUR 17.1 million in 2019 (2018: no revenue). ANNUAL REPORT 2019 REPORT ANNUAL SES 115 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 4—OPERATING EXPENSES NOTE 5—AUDIT AND NON-AUDIT FEES NOTE 6—FINANCE INCOME AND COSTS
The operating expense categories disclosed include the following For 2019 and 2018 the Group has recorded charges, billed and Finance Income and Costs T37 types of expenditure: accrued, from its independent auditors and affiliated companies thereof, as set out below: EUR MILLION 2019 2018 1) Cost of sales, which excludes staff costs and depreciation, repre Finance income sents cost categories which generally vary directly with revenue. Audit and Non-Audit Fees T36 Interest income 3.8 11.6 Such costs include the rental of third-party satellite capacity, cus Net foreign exchange gains 1 2.8 5.1 EUR MILLION 2019 2018 tomer support costs, such as uplinking, hosting and monitoring, Total 6.6 16.7 and other costs of sales such as equipment rental, engineering Fees for statutory audit of annual and consolidated accounts 2.3 2.4 work, commissions, hardware and implementation costs. Finance costs Fees charged for other assurance services 0.2 0.1 Interest expense (excluding amounts capitalised) (144.2) (128.0) Fees charged for other non-audit services - 0.1 Cost of Sales T35 Loan fees and origination costs and other (28.3) (35.0) Total audit and non-audit fees 2.5 2.6 EUR MILLION 2019 2018 Total (172.5) (163.0) Rental of third-party satellite capacity (74.5) (89.8) 1 Net foreign exchange gains are mostly related to revaluation of bank accounts, deposits and other monetary items denominated in US dollars. Customer support costs (39.4) (36.7) Other assurance services represent primarily interim dividends Other cost of sales (155.2) (159.3) reviews and contractual audits. Total cost of sales (269.1) (285.8)
2) Staff costs of EUR 311.7 million (2018: EUR 305.7 million) include gross salaries and employer’s social security payments, pay ments into pension schemes for employees, charges arising under share-based payment schemes, as well as staff related restructuring charges of EUR 13.6 million (2018: EUR 11.1 million). At the year-end the total full-time equivalent number of mem bers of staff is 2,159 (2018: 2,147). 3) Other operating expenses in the amount of EUR 186.5 million (2018: EUR 163.3 million) are by their nature less variable to revenue development. Such costs include office related and technical facility costs, in-orbit insurance costs, marketing expenses, general and administrative expenditure, consulting charges, travel-related expenditure and movements in provisions for debtors. Other operating expenses also include an amount of EUR 7.0 million ANNUAL REPORT 2019 REPORT ANNUAL (2018: nil) restructuring charges in connection with charges
SES associated with the Group’s ongoing optimisation programme. 116 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 7—INCOME TAXES A reconciliation between the income tax benefit and the profit before During 2019, as a result of a change in the Dutch corporate income tax of the Group multiplied by a theoretical tax rate of 25.69% (2018: tax rate from 25% to 21.7% effective as of 1 January 2021, the Taxes on income comprise the taxes paid or owed in the individual 26.76%) which corresponds to the Luxembourg domestic tax rate for deferred tax assets and liabilities balances have been re-measured. countries, as well as deferred taxes. Current and deferred taxes can the year ended 31 December 2019 is as follows: The total impact of re-measurement was an income tax expense of be analysed as follows: EUR 6.6 million. Income Tax Reported in the Income Taxes T38 Consolidated Income Statement T39 In 2018 New Jersey made significant changes to its corporate income tax law which became effective as of 1 January 2019. Amongst those EUR MILLION 2019 2018 EUR MILLION 2019 2018 changes was one to the method of apportioning income to the state Current income tax Profit before tax from continuing operations 199.5 244.8 of New Jersey whereby the income is now deemed to be sourced Current income tax charge (86.4) (72.1) Multiplied by theoretical tax rate 51.3 65.5 based on the jurisdiction in which the customer receives the benefit. Adjustments in respect of prior periods 11.9 (1.8) Effect of different foreign tax rates (19.3) 7.6 This change triggered a decrease of income apportioned to the state Foreign withholding taxes (5.8) (9.9) Investment tax credits (71.7) (109.6) of New Jersey and therefore the deferred tax liability as of 31 Decem Total current income tax (80.3) (83.8) Tax exempt income 1.3 (22.7) ber 2018 was restated resulting in a net tax income adjustment of Non-deductible expenditures 3.6 14.9 EUR 24.1 million. Deferred income tax Taxes related to prior years (5.0) 12.8 Relating to origination and reversal of temporary Effect of changes in tax rate (20.2) (21.8) Other changes in the tax rates resulted in a EUR 0.5 million tax expense. differences 100.5 118.0 Other changes in group tax provision Relating to tax losses brought forward 38.7 (4.2) not included in separate lines (1.7) 4.9 Changes in tax rate 18.0 8.2 Impairment on investments in subsidiaries All the above re-measurements were considered changes in account Adjustment of prior years (0.4) 3.7 and intangible assets (25.2) (3.1) ing estimate in accordance with IAS 8. Foreign withholding taxes 5.8 9.9 Total deferred income tax 156.8 125.7 Other 4.6 (0.3) FOREIGN WITHHOLDING TAX
Income tax benefit per Income tax reported in consolidated income statement 76.5 41.9 the consolidated income statement (76.5) (41.9) The foreign withholding tax of EUR 5.8 million includes a provision of EUR 2.9 million for Indian withholding tax withheld by customers and paid to the Indian tax authorities. A final decision on Indian withhold Consolidated statement of changes in equity ing taxes is still pending at the level of the Supreme Court. The Current and Deferred Income tax related to items EFFECT OF CHANGES IN TAX RATE (charged) or credited directly in equity remaining EUR 2.9 million mainly relates to the provision for Brazilian Post-employment benefit obligation 0.3 (0.2) As a result of the reduction of Luxembourg corporate income tax withholding tax. Impact of currency translation (2.9) (20.8) rate rom 26.76% to 25.69% effective January 2019, the relevant deferred tax assets and liabilities balances have been re-measured. Net investment hedge—current tax 6.8 21.2 The total impact of the re-measurement is an income tax benefit of Tax impact of the treasury shares impairment recorded in the statutory financial statements 5.8 (6.4) EUR 2.3 million. Tax impact on perpetual bond 18.0 18.8 ANNUAL REPORT 2019 REPORT ANNUAL Current and deferred income taxes
SES reported in equity 28.0 12.6 117 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
INVESTMENT TAX CREDITS IMPAIRMENT ON SUBSIDIARIES AND Deferred tax assets have been offset against deferred tax liabilities INTANGIBLE ASSETS where they relate to the same tax authority and the entity concerned In 2019, the continuing investment in the mPower and SES-17 pro has a legally enforceable right to set off current tax assets against curements triggered the recognition of deferred tax assets for invest The impairment on subsidiaries booked in Luxembourg for a total of current tax liabilities. ment tax credits of EUR 43.1 million and EUR 28.4 million respectively. EUR 153.9 million (2018: EUR 66.5 million) gave rise to a tax benefit The remaining EUR 5.2 million of deferred tax assets for investment of EUR 39.6 million (2018: EUR 17.7 million). In 2019 the Group recognised additional deferred tax assets for tax tax credits was recognised in connection with other investments by losses carried forward in Luxembourg (EUR 28.9 million) and in Group companies in Luxembourg. The impairment charge of EUR 64.0 million (2018: EUR 63.3 million) Germany (EUR 7.7 million). Tax losses can be carried forward in relating to the MX1 CGU resulted in a negative ETR impact of Luxembourg for 17 years and in Germany indefinitely. Using the In May 2018, following the completion of 100% acquisition of O3b EUR 14.4 million (2018: EUR 14.6 million). estimated future taxable income based on the most recent business Networks in 2016 and its subsequent financial reorganisation, the O3b plan information approved by the Board of Directors, the Company business assets were transferred from Jersey to Luxembourg. This NOTE 8—DEFERRED INCOME TAX has concluded that the deferred tax assets are recoverable. triggered the recognition of EUR 74.9 million of investment tax cred its in Luxembourg of which EUR 23.5 million was recorded as current The deferred taxes positions included in the consolidated financial In addition to the recoverable tax losses for which the Group has tax and EUR 51.4 million as a deferred tax asset. statements can be analysed as follows: recognised deferred tax assets, the Group has further tax losses of EUR 436.8 million as at 31 December 2019 (31 December 2018: Based on Luxembourg tax law, unused investment tax credits can be Deferred Income Tax T40 EUR 569.9 million) which are available for offset against future taxable carried forward for ten years. SES believes that it is probable that suf profits of the companies in which the losses arose. EUR 394.7 million Deferred Deferred Deferred Deferred ficient taxable profits will be available in the Luxembourg fiscal unity tax assets tax assets tax liabili- tax liabili- (31 December 2018: 478.0 million) of these tax losses are generated in the future to use all the available investment tax credits. EUR MILLION 2019 2018 ties 2019 ties 2018 in the US. Deferred tax assets have not been recognised in respect Losses carried of these losses as they may not be used to offset taxable profits else GovSat-1 was successfully launched on 31 January 2018 and entered forward 71.3 32.3 - - where in the Group and they have arisen in subsidiaries that are not in operational service on 28 March 2018. A deferred tax asset for Tax credits 168.0 96.7 - - expected to generate taxable profits against which these losses could investment tax credits of EUR 25.8 million was recognised by its owner Intangible assets 30.5 38.3 (207.4) (215.9) be offset in the foreseeable future. LuxGovSat S.A. in the same year. LuxGovSat S.A. is not part of the Tangible assets - - (169.1) (213.4) Luxembourg fiscal unity. As a result of management’s analysis of the No deferred income tax liabilities have been recognised for withhold Trade receivables 22.8 17.8 - - recoverability of this deferred tax asset, an amount of EUR 5 million ing tax and other taxes which would be payable on the unremitted Other 9.4 8.5 (24.5) (14.5) was reversed during 2019. earnings of certain subsidiaries. Such amounts are permanently rein Total deferred tax assets / (liabilities) 302.0 193.6 (401.0) (443.8) vested or not subject to taxation. Offset of deferred taxes (41.5) (31.3) 41.5 31.3 Net deferred tax assets / (liabilities) 260.5 162.3 (359.5) (412.5) ANNUAL REPORT 2019 REPORT ANNUAL SES 118 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
The movement in deferred income tax assets and liabilities during NOTE 9—COMPONENTS OF OTHER the year, without taking into consideration the offsetting of balances COMPREHENSIVE INCOME is as follows: Components of Other Comprehensive Income T43 Movement in deferred Income Tax Assets T41 EUR MILLION 2019 2018 Losses Impact of currency translation 142.5 345.2 carried Intangible DEFERRED TAX ASSETS forward Tax credits assets Receivables Other Total Income tax effect (2.9) (20.8) At 1 January 2018 33.5 6.0 37.7 21.0 11.1 109.3 Total impact of currency translation, net of tax 139.6 324.4 Changes in accounting policies - - - 4.3 - 4.3 (Charged)/credited to the income statement (2.1) 89.7 0.8 (8.0) (3.0) 77.4 The impact of currency translation in other comprehensive income Charged directly to equity - - - - (0.2) (0.2) relates to exchange gains or losses arising on the translation of the Exchange difference1 0.9 1.0 (0.2) 0.5 0.6 2.8 net assets of foreign operations from their functional currency to euro, which is the Company’s functional and presentation currency. The At 31 December 2018 32.3 96.7 38.3 17.8 8.5 193.6 assets and liabilities of consolidated foreign operations are translated (Charged)/credited to the income statement 38.7 71.1 (7.6) 4.9 0.4 107.5 into euro at the year-end exchange rates, while the income and Charged directly to equity - - - - 0.3 0.3 expense items of these foreign operations are translated at the aver Exchange difference1 0.3 0.2 (0.2) 0.1 0.2 0.6 age exchange rate of the year. At 31 December 2019 71.3 168.0 30.5 22.8 9.4 302.0 The unrealised gain in 2019 of EUR 142.5 million (2018: EUR 345.2 mil lion) reflects the impact on the valuation of SES’s net US dollar assets Movement in deferred Income Tax Liabilities T42 of the strengthening of the US dollar against the euro from 1.1450 to Intangible Tangible 1.1234 (2018: 1.1993 to 1.1450). This effect is partially offset by the DEFERRED TAX LIABILITIES assets assets Other Total impact of the net investment hedge (›› Note 18). At 1 January 2018 218.6 244.3 14.5 477.4 Charged/(credited) to the income statement (13.0) (35.3) - (48.3) NOTE 10—EARNINGS PER SHARE Exchange difference1 10.3 4.4 - 14.7 Earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders of each class of shares by the At 31 December 2018 215.9 213.4 14.5 443.8 weighted average number of shares outstanding during the year as Charged/(credited) to the income statement (12.6) (46.1) 9.4 (49.3) adjusted to reflect the economic rights of each class of share. The net 1 Exchange difference 4.1 1.8 0.6 6.5 profit for the year attributable to ordinary shareholders has been adjusted At 31 December 2019 207.4 169.1 24.5 401.0 to include an assumed coupon, net of tax, on the perpetual bond. 1 A foreign exchange impact arises due to the translation of Group’s operations with a different functional currency than euro. ANNUAL REPORT 2019 REPORT ANNUAL This amounts to EUR 5.9 million as at 31 December 2019 (2018: EUR 11.9 million) SES 119 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
For the year 2019, basic earnings per share of EUR 0.54 per Class A Diluted earnings per share is calculated by adjusting the weighted NOTE 11—DIVIDENDS PAID share (2018: EUR 0.54), and EUR 0.22 per Class B share (2018: average number of ordinary shares outstanding to assume conversion AND PROPOSED EUR 0.22) have been calculated on the following basis: of all dilutive potential ordinary shares which are primarily related to the share-based compensation plans. A calculation is done to deter Dividends declared and paid during the year: Profit attributable to the owners of the parent for calculating basic mine the number of shares that could have been acquired at fair value earnings per share was as follows: based on the monetary value of the subscription rights attached to Dividends Declared and Paid T48 outstanding share options. The number of shares calculated as above EUR MILLION 2019 2018 Profit Attributable to Owners T44 is compared with the number of shares that would have been issued assuming the exercise of the share options and the difference, if it Class A dividend for 2018: EUR 0.80 EUR MILLION (2017: EUR 0.80) 306.8 306.8 2019 2018 results in a dilutive effect, is considered to adjust the weighted aver Profit attributable to owners of the parent 296.2 292.4 age number of shares. Class B dividend for 2018: EUR 0.32 (2017: EUR 0.32) 61.4 61.4 Assumed coupon on perpetual bond (net of tax) (48.8) (48.1) Total 368.2 368.2 Total 247.4 244.3 For the year 2019, diluted earnings per share of EUR 0.54 per Class A share (2018: EUR 0.54), and EUR 0.22 per Class B share (2018: EUR 0.21) have been calculated on the following basis: Assumed coupon accruals of EUR 48.8 million (net of tax) for the year Dividends declared are paid net of any withholding tax (2019: ended 31 December 2019 (2018: EUR 48.1 million) related to the per Diluted Earnings per Share T46 EUR 37.3 million, 2018: EUR 35.7 million). petual bonds issued during 2016 have been considered for the cal culation of the basic and diluted earnings available for distribution. EUR MILLION 2019 2018 Dividends proposed for approval at the annual general meeting to be Profit attributable to owners of the parent 296.2 292.4 held on 2 April 2020, which are not recognised as a liability as at Weighted average number of shares, net of own shares held, for cal Assumed coupon on perpetual bond (net of tax) (48.8) (48.1) 31 December 2019: culating basic earnings per share were as follows: Total 247.4 244.3 Dividend Proposed T49 A- and B-shares T45 The weighted average number of shares, net of own shares held, for EUR MILLION 2020 2019 2019 2018 calculating diluted earnings per share was as follows: Class A dividend for 2019: EUR 0.40 Class A shares (in million) 378.0 376.4 (2018: EUR 0.80) 153.4 306.8 Class B shares (in million) 191.7 191.7 Class B dividend for 2019: EUR 0.16 Weighted Average Number of Shares T47 (2018: EUR 0.32) 30.7 61.4 Total 569.7 568.1 2019 2018 Total 184.1 368.2 Class A shares (in million) 379.6 379.0 The weighted average number of shares is based on the capital struc Class B shares (in million) 191.7 191.7 ture of the Company as described in ›› note 20. Total 571.3 570.7 ANNUAL REPORT 2019 REPORT ANNUAL SES 120 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 12—PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment 2019 T50
Other fixtures and fittings, tools and EUR MILLION Land and buildings Space segment Ground Segment equipment Total Cost As at 1 January 2019 281.5 11,676.5 752.3 200.1 12,910.4 Additions 11.9 8.81 9.2 5.8 35.7 Disposals (8.0) (14.9)2 (2.9) (2.1) (27.9) Retirements (0.3) (361.0)3 (2.9) (1.7) (365.9) Transfers from assets in course of construction (Note 13) 0.3 598.84 67.1 7.8 674.0 Transfers from intangible assets - - 5.0 2.0 7.0 Transfers between categories 1.4 (2.0) (1.4) 2.0 - Impact of currency translation 3.0 148.2 7.5 0.8 159.5 As at 31 December 2019 289.8 12,054.4 833.9 214.7 13,392.8
Accumulated depreciation As at 1 January 2019 (162.9) (7,027.8) (472.9) (139.9) (7,803.5) Depreciation (18.1) (561.7) (63.5) (20.8) (664.1) Impairment - (32.8) - - (32.8) Disposals 4.3 14.92 2.9 1.9 24.0 Retirements 0.3 361.03 2.9 1.7 365.9 Impact of currency translation (1.3) (88.9) (5.1) (1.1) (96.4) As at 31 December 2019 (177.7) (7,335.3) (535.7) (158.2) (8,206.9)
Net book value as at 31 December 2019 112.1 4,719.1 298.2 56.5 5,185.9
1 Addition of 17 AMC-8 transponders (including EUR 6.1 million non-cash transaction) 2 Sale of 2 AMC-18 transponders (non-cash transaction) 3 AMC-10 and ASTRA 1H were retired in 2019 4 SES-12 and O3b satellites 17-20 became operational during 2019 ANNUAL REPORT 2019 REPORT ANNUAL SES 121 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Property, Plant and Equipment 2018 T51
Other fixtures and fittings, tools and EUR MILLION Land and buildings Space segment Ground Segment equipment Total Cost As at 1 January 2018 239.8 10,410.2 652.7 173.6 11,476.3 Adoption of IFRS 161 36.6 - 8.1 2.1 46.8 Additions 0.7 0.7 16.1 2.3 19.8 Disposals - (11.8) (2.2) - (14.0) Retirements (1.1) (0.1) (18.9) (2.0) (22.1) Transfers from assets in course of construction (Note 13)2 - 955.4 85.6 12.5 1,053.5 Transfer 0.1 (1.8) (13.8) 10.4 (5.1) Impact of currency translation 5.4 323.9 24.7 1.2 355.2 As at 31 December 2018 281.5 11,676.5 752.3 200.1 12,910.4
Accumulated depreciation As at 1 January 2018 (144.0) (6,203.9) (414.9) (122.1) (6,884.9) Depreciation (17.4) (529.4) (62.8) (16.3) (625.9) Impairment - (93.1) - - (93.1) Disposals - - 2.2 - 2.2 Retirements 1.1 0.1 18.9 2.0 22.1 Transfer - - 1.5 (1.5) - Impact of currency translation (2.6) (201.5) (17.8) (2.0) (223.9) As at 31 December 2018 (162.9) (7,027.8) (472.9) (139.9) (7,803.5)
Net book value as at 31 December 2018 118.6 4,648.7 279.4 60.2 5,106.9
1 Represents impact of the adoption of the IFRS 16 “Leases” (Note 2). 2 SES-15, SES-14, SES-16 and O3b satellites 13-16 became operational during 2018.
During 2019, an assessment of the useful life for ASTRA 5B, SES-1, As at 31 December 2019, the amount of the property, plant and equip SES-8 and SES-9 satellites was performed, resulting in a net decrease ment pledged in relation to the Group’s liabilities is nil (2018: nil). of the depreciation expense for the year of EUR 8.1 million. For further information related to right-of use assets, ›› see note 29. ANNUAL REPORT 2019 REPORT ANNUAL SES 122 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
IMPAIRMENT FOR SPACE SEGMENT The most recent testing showed that certain satellites have an impair For Ciel-2, the impairment was caused by an extension of the contract ment, or an additional impairment in the least favourable case— with Ciel-2’s lone customer agreed in November 2018. For ASTRA 5B In 2019, the impairment charge for space segment assets recorded a combination of higher discount rates or lower EBITDA. A 1% in and YahSat 1A, the impairment was caused by a reassessment of the was EUR 32.8 million (2018: EUR 93.1 million). crease in the discount rates would increase satellite impairments by future revenues to be achieved in the markets served by those sat EUR 26.0 million. Taken separately, a 5% decrease in EBITDA would ellites. For NSS-10, the impairment was caused by a reassessment of The following table (T52) discloses the impairment charge and related increase satellite impairments by EUR 28.8 million. the future revenues to be achieved on the satellite as it approaches assumptions used in the impairment test for the satellites presenting its end of life. In addition, an impairment charge of EUR 5.5 million was impairment indicators in 2019. The following table (T53) discloses the impairment charge and related recorded on AMC-10 due to technical deterioration of that satellite. assumptions used in the impairment test for the satellites presenting For ASTRA 5B, YahSat 1A, and NSS-9, the impairment was caused by impairment indicators in 2018. a reassessment of the future cash flows to be achieved in the markets served by those satellites. For Ciel-2, the impairment was caused by Impairment Charge and Assumptions 2019 T52 a further extension of the contract with Ciel-2’s sole customer agreed Impairment Recoverable Discount Rate Previous estimate in August 2019. For NSS-10, the impairment was caused by a reas EUR MILLION charge Amount (pre-tax) of value in use (‘VIU’) Nature of the asset sessment of the future revenues to be achieved on the satellite as it ASTRA 5B 11.2 152.7 VIU 6.27% 177.3 Satellite serving Eastern Europe approaches its end of life. Ciel-2 10.8 23.0 VIU 8.09% 41.1 Satellite serving DTH market in North America YahSat 1A 6.9 34.7 VIU 10.90% 45.2 Satellite serving MENA and Southwest Asia As part of standard impairment testing procedures, the Group NSS-10 3.2 - VIU 8.09% 12.5 Satellite serving Americas, Africa, and Europe assesses the impact of changes in the discount rates and reductions in EBITDA. Discount rates are simulated up to 1% below and above NSS-9 0.7 41.9 VIU 8.09% 51.1 Satellite serving Pacific Ocean Region the CGU’s specific rate used in the base valuation, and EBITDA pro Total 32.8 jections are simulated up to 5% below and above the base valuation. In this way a matrix of valuations is generated which reveals the poten Impairment Charge and Assumptions 2018 T53 tial exposure to impairment charges based on movements in the val uation parameters which are within the range of outcomes foreseea Impairment Recoverable Discount Rate Previous estimate of ble at the valuation date. EUR MILLION charge Amount (pre-tax) value in use (‘VIU’) Nature of the asset Ciel-2 42.9 41.1 VIU 9.07% 139.1 Satellite serving DTH market in North America ASTRA 5B 34.3 177.3 VIU 6.79% 236.9 Satellite serving Eastern Europe YahSat 1A 6.0 45.2 VIU 9.07% 173.5 Satellite serving MENA and Southwest Asia NSS-10 4.4 12.5 VIU 9.07% 42.6 Satellite serving Americas, Africa, and Europe Total 87.6 ANNUAL REPORT 2019 REPORT ANNUAL SES 123 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 13—ASSETS IN THE COURSE OF CONSTRUCTION
Assets in the Course of Construction 2019 T54 Borrowing costs of EUR 8.2 million (2018: EUR 42.3 million) arising from financing specifically relating to satellite procurements were cap Land and Space Ground Fixtures, tools EUR MILLION Buildings segment segment & equipment Total italised during the year and are included in additions to ‘Space seg ment’ in the above table. Cost and net book value as at 1 January 2019 0.2 831.0 68.8 7.4 907.4 A weighted average effective rate of 3.73% (2018: 3.90%) was used, Movements in 2019 representing the Group’s average weighted cost of borrowing. Exclud Additions 0.7 600.3 57.1 21.0 679.1 ing the impact of the loan origination costs and commitment fees the Transfers to assets in use (Note 12) (0.3) (598.8) (67.1) (7.8) (674.0) average weighted interest rate was 3.63% (2018: 3.62%). Impact of currency translation - 9.5 1.2 0.5 11.2 Cost and net book value as at 31 December 2019 0.6 842.0 60.0 21.1 923.7 During 2019 the Group recognized EUR 290.6 million (2018: EUR 174.1 million) additions in respect of the mPower arrangement and EUR 181.2 million additions in respect of the SES-17 construction, described in ›› note 27. Assets in the Course of Construction 2018 T55 Due to the nature of the arrangements, these transactions are included in the Group’s assets in the course of construction space Land and Space Ground Fixtures, tools segment and included in ‘Payments for purchases of tangible assets’ EUR MILLION Buildings segment segment & equipment Total within the consolidated statement of cash flows only to the extent Cost and net book value as at 1 January 2018 0.2 1,388.3 81.5 10.2 1,480.2 that payments were made to the suppliers.
Movements in 2018 Additions - 359.5 71.6 9.4 440.5 Transfers to assets in use (Note 12) - (955.4) (85.6) (12.5) (1,053.5) Impact of currency translation - 38.6 1.3 0.3 40.2 Cost and net book value as at 31 December 2018 0.2 831.0 68.8 7.4 907.4 ANNUAL REPORT 2019 REPORT ANNUAL SES 124 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 14—INTANGIBLE ASSETS
Intangible Assets 2019 T56 Intangible Assets 2018 T57
Orbital slot Orbital slot Orbital slot Orbital slot licence licence Internally licence licence Internally rights rights Other generated rights rights Other generated (indefinite- (definite definite life develop- (indefinite- (definite definite life develop- EUR MILLION life) Goodwill life) intangibles ment costs Total EUR MILLION life) Goodwill life) intangibles ment costs Total Cost Cost As at 1 January 2019 2,058.1 2,347.5 769.8 440.6 26.6 5,642.6 As at 1 January 2018 1,972.1 2,243.9 772.4 387.8 26.5 5,402.7 Additions 0.6 - 6.8 8.5 28.7 44.6 Additions 0.8 - - 7.7 30.6 39.1 Retirement - - - (3.9) - (3.9) Transfers - - - 3.8 1.3 5.1 Transfers from assets in course of Transfers from assets in course of construction - - - 9.9 (9.9) - construction 0.8 - (1.4) 32.6 (32.0) - Transfers to property, plant and Impact of currency translation 84.4 103.6 (1.2) 8.7 0.2 195.7 equipment - - - - (7.0) (7.0) As at 31 December 2018 2,058.1 2,347.5 769.8 440.6 26.6 5,642.6 Impact of currency translation 36.3 50.1 - 3.1 0.1 89.6
As at 31 December 2019 2,095.0 2,397.6 776.6 458.2 38.5 5,765.9 Amortisation As at 1 January 2018 - - (511.4) (260.4) - (771.8) Amortisation Amortisation - - (38.0) (44.1) - (82.1) As at 1 January 2019 - (63.3) (549.0) (309.8) - (922.1) Impairment - (63.3) - - - (63.3) Amortisation - - (37.8) (52.5) - (90.3) Transfers - - 0.4 (0.4) - - Impairment - (64.0) - - - (64.0) Impact of currency translation - - - (4.9) - (4.9) Retirement - - - 3.9 - 3.9 As at 31 December 2018 - (63.3) (549.0) (309.8) - (922.1) Impact of currency translation - (6.0) (0.4) (1.8) - (8.2)
As at 31 December 2019 - (133.3) (587.2) (360.2) - (1,080.7) Book value as at 31 December 2018 2,058.1 2,284.2 220.8 130.8 26.6 4,720.5
Book value as at 31 December 2019 2,095.0 2,264.3 189.4 98.0 38.5 4,685.2 ANNUAL REPORT 2019 REPORT ANNUAL SES 125 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
INDEFINITE-LIFE INTANGIBLE ASSETS 2) Changes in discount rates Similarly to SES MEO, MX1 generates largely separate cash flows and hence has been considered a separate CGU in 2019. The Group’s indefinite-life intangibles include goodwill and orbital slot Discount rates reflect management’s estimate of the risks spe licence rights. cific to each CGU. Management uses a pre-tax weighted average The pre-tax discount rates for each CGU are presented below: cost of capital as discount rate for each CGU. This reflects mar Impairment testing procedures are performed annually, or whenever ket interest rates of twenty-year bonds in the market concerned, Goodwill: Pre-tax Discount Rates for CGU T58 events or changes in circumstances indicate that the carrying amount the capital structure of businesses in the Group’s business sec of such assets may not be recoverable. The annual impairment tests tor, and other factors, as necessary, applied specifically to the 2019 2018 are performed as of 31 October each year. The recoverable amounts CGU concerned. SES GEO operations 8.37% 8.40% are determined based on a value-in-use calculation (›› Note 2) using SES MEO operations 9.32% 10.21% the most recent business plan information approved by the Board of 3) Perpetuity growth rates MX1 8.09% 8.66% Directors, which covers a period of five years. Growth rate assumptions used to extrapolate cash flows beyond The calculations of value in use are most sensitive to: the business planning period are based on the commercial expe These rates were selected to reflect market interest rates and com rience relating to the CGUs concerned and the expectations for mercial spreads; the capital structure of businesses in the Group’s 1) Movements in the underlying business plan assumptions developments in the markets which they serve. business sector; and the specific risk profile of the businesses con cerned. The terminal growth rate used in the valuations is 2% (2018: Business plans are drawn up annually and provide an assessment Goodwill 2%), which reflects the most recent long-term planning assumptions of the expected developments for a five-year period beyond the Management identified the following CGUs at the level of which good approved by the Board of Directors and can be supported by refer end of the year when the plan is drawn up. These business plans will is allocated: SES GEO operations, SES MEO operations, MX1 and ence to the trading performance of the companies concerned over a reflect both the most up-to-date assumptions concerning the Other. longer period. CGU’s markets and also developments and trends in the busi ness of the CGU. For the provision of satellite capacity these will The level of integration of SES GEO operations has led management As a result of the impairment tests conducted as of 31 December 2019, particularly take into account the following factors: to conclude that it represents a single group of CGUs to which the the Group recorded an impairment charge of EUR 64.0 million relat goodwill is allocated for impairment test purposes. ing to the MX1 CGU (2018: EUR 63.3 million). The MX1 CGU represents • the expected developments in transponder fill rates, including SES’s media services business, comprised of the legacy SES Platform the impact of the replacement capacity; SES MEO operations, representing the O3b Networks business Services business in Germany and the legacy RR Media business in • any changes in the expected capital expenditure cycle—due to acquired in 2016, is considered a separate CGU, as the business gen Israel, which were brought together following the acquisition of RR technical degradation of a satellite or through the identified need erates cash inflows that are currently largely independent from SES’s Media in 2016. The impairment reflects business developments over for replacement capacities; and GEO operations ›› see note 2. For the MEO CGU, the impairment test the past year, most notably increased competition for MX1’s services • any changes in satellite procurement, launch or cost assump period was extended beyond the five-year period, to 2034. This exten and the profitability of those services. The recoverable amount, rep tions, including launch schedule. sion is necessary to fully capture the contracted capital expenditure resented by the value in use, is EUR 220.1 million, reflecting the pre- and expected growth of the business in connection with the O3b tax discount rate 8.09%. The previous estimate of value in use was mPOWER constellation, which is expected to launch in 2021, as well EUR 292.4 million. as properly reflect the timing of the replacement capital expenditure. ANNUAL REPORT 2019 REPORT ANNUAL SES 126 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
The goodwill has a net book value as at 31 December 2019 and 2018 Taken separately from changes in discount and perpetuity growth sector; and the specific risk profile of the businesses concerned. The by CGU as presented below: rates, a 5% reduction in EBITDA would not lead to an impairment terminal growth rate used in the valuations is 2% (2018: 2%), which charge in the SES GEO or SES MEO CGUs. A 5% reduction in reflects the most recent long-term planning assumptions approved by Goodwill: Net Book Value T59 EBITDA would increase the impairment charge in the MX1 CGU by the Board of Directors and can be supported by reference to the trad EUR 5.7 million. ing performance of the companies concerned over a longer period. EUR MILLION 2019 2018 SES GEO operations 2,054.3 2,016.4 Taken separately from changes in discount rates, perpetuity growth There were no impairment charges on orbital slot licence rights SES MEO operations 153.4 150.1 rates and EBITDA, for SES MEO, a delay in the launch of the mPOWER recorded for the year ending 31 December 2019 or 2018. The orbital MX1 51.1 111.8 constellation by one year would not lead to an impairment charge. slot license rights have a net book value as at 31 December 2019 and Other (SES GS) 5.5 5.9 2018 by CGU as presented below: Total 2,264.3 2,284.2 Orbital slot licence rights The rights conveyed by orbital slot licences in different jurisdictions Orbital Slot Licence Rights: Net Book Value T61 can have varying characteristics that make them separate and dis As part of standard impairment testing procedures, the Group tinct from the orbital slot licence rights in other jurisdictions. For this EUR MILLION 2019 2018 assesses the impact of changes in the discount rates and growth reason, the Group aggregates the GEO orbital slot licence rights in MEO operations 1,134.3 1,113.0 assumptions of the valuation surplus, or deficit as the case may be. Europe, the U.S., Canada, and Mexico into separate CGUs. All other Europe 150.2 151.1 Both discount rates and terminal values are simulated up to 1% below GEO orbital slot licence rights are not separable and do not generate U.S. 321.5 315.4 and above the CGU’s specific rate used in the base valuation. In this separate cash flows, and thus are considered a single CGU, “Interna Canada 7.0 6.4 way a matrix of valuations is generated which reveals the potential tional”. The MEO orbital rights are not separable and do not generate Mexico 7.2 6.8 exposure to impairment charges for each CGU based on movements separate cash flows, and thus are considered a single CGU, which is International 474.8 465.4 in the valuation parameters which are within the range of outcomes tested for impairment together with the related corresponding good Total 2,095.0 2,058.1 foreseeable at the valuation date. will and the MEO satellites constellation.
The most recent testing showed that the SES MEO and MX1 CGUs The pre-tax discount rates for each CGU are presented below: would have an impairment in the least favourable case—a combina As part of standard impairment testing procedures, as with goodwill, tion of lower terminal growth rates and higher discount rates. In this Orbital Slots Licence Rights: the Group assesses the impact of changes in the discount rates and least favourable case, the SES MEO CGU would have an impairment Pre-Tax discount Rates for CGU T60 growth assumptions of the valuation surplus, or deficit as the case of EUR 60.6 million and the MX1 CGU would have an additional impair may be. Both discount rates and terminal values are simulated up to ment of EUR 49.4 million. There would be no impairment in the SES 2019 2018 1% below and above the CGU’s specific rate used in the base valua GEO CGU. Unfavourable changes in the factors listed above under SES MEO operations 9.32% 10.21% tion. In this way a matrix of valuations is generated which reveals the ‘Movements in the underlying business plan assumptions’, in combi Europe 9.37% 9.40% potential exposure to impairment charges for each CGU based on nation with unfavourable changes in discount rates and perpetuity U.S., Canada, Mexico, and International 10.12% 11.10% movements in the valuation parameters which are within the range growth rates, would increase these impairments. of outcomes foreseeable at the valuation date.
Similar to the pre-tax discount rates used for goodwill testing, these For orbital slot licence rights, the least favourable case—a combination ANNUAL REPORT 2019 REPORT ANNUAL rates were selected to reflect market interest rates and commercial of lower terminal growth rates and higher discount rates—would lead
SES spreads; the capital structure of businesses in the Group’s business to impairment charges of EUR 48.3 million in the International CGU. 127 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
DEFINITE LIFE INTANGIBLE ASSETS The Group’s primary definite life intangible asset is the agreement NOTE 15—ASSETS AND LIABILITIES concluded by SES ASTRA with the Luxembourg government in rela RELATED TO CONTRACTS WITH The definite-life intangible assets as at 31 December 2019 have a net tion to the usage of Luxembourg frequencies in the orbital positions CUSTOMERS book value by CGU as presented below: of the geostationary arc from 45˚ west to 50˚ east for the period from 1 January 2001 to 31 December 2021. Given the finite nature of this The Group has recognised the following assets and liabilities related Definite Life Intangible Assets 2019 T62 agreement, these usage rights—valued at EUR 550.0 million at the to contracts with customers: date of acquisition—are being amortised on a straight-line basis over EUR MILLION 2019 the 21-year term of the agreement. Assets and Liabilities Related to Orbital slot Contracts With Customers T64 licence In November 2019, SES and the Luxembourg government reached an rights Other agreement to renew SES’s concession to operate satellites operating EUR MILLION 2019 2018 Luxembourg 173.6 24.8 under Luxembourg’s jurisdiction for 20 years, effective from January Current contract assets Israel - 45.2 2022 when the current concession expires, with an annual fee of Trade debtors 525.5 509.5 Brazil 10.9 1.3 EUR 1 million payable from 2025 onwards. Under the agreement, and Provision for trade debtors (94.0) (66.4) Other 4.9 26.7 starting from 2022, SES will also contribute a maximum of EUR 7 mil Trade debtors, net of provisions 431.5 443.1 Total 189.4 98.0 lion per year into a space sector fund. Unbilled accrued revenue 122.1 111.9 Provision for unbilled accrued revenue (13.4) (13.6) The Group also holds orbital slot licence rights in Brazil, which were Unbilled accrued revenue, net of provisions 108.7 98.3 awarded to a Group subsidiary at auction in 2014 for a 15-year term. Deferred customer contract costs 17.9 17.5 The definite-life intangible assets as at 31 December 2018 have a net These rights are being amortised over a 30-year period, reflecting the 558.1 558.9 book value by CGU presented below: Group’s ability to renew the rights once in 2029 at a minimal cost, Non-current contract assets assuming they are being utilised. Unbilled accrued revenue 290.9 306.2 Definite Life Intangible Assets 2018 T63 Provision for unbilled accrued revenue (5.4) (11.7) As at 31 December 2019, the amount of the intangible assets pledged EUR MILLION 2018 in relation to the Group’s liabilities is nil (2018: nil). Unbilled accrued revenue, net of provisions 285.5 294.5 Deferred customer contract costs 17.7 10.3 Orbital slot licence 303.2 304.8 rights Other Luxembourg 204.1 44.6 Current contract liabilities Israel - 53.8 Deferred income 467.0 476.1 Brazil 11.5 1.1 Other 5.2 31.3 Non-current contract liabilities Total 220.8 130.8 Deferred income 316.6 370.3 ANNUAL REPORT 2019 REPORT ANNUAL SES 128 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
The following table shows the movement in deferred income recog NOTE 16—TRADE AND OTHER NOTE 17—FINANCIAL INSTRUMENTS nised by the Group: RECEIVABLES FAIR VALUE ESTIMATION AND HIERARCHY Movement in Deferred Income 2019 T65 Trade and Other Receivables T67 The Group uses the following hierarchy levels for determining the fair EUR MILLION Non-current Current EUR MILLION 2019 2018 value of financial instruments by valuation technique: As at 1 January 2019 370.3 476.1 Trade receivables, net of provisions 431.5 443.1 Revenue recognised during the year - (1,309.1) Unbilled accrued revenue, net of provisions 394.2 392.8 • Level 1—Quoted prices in active markets for identical assets or New billings - 1,267.6 Other receivables 49.9 72.8 liabilities; Other movements1 (56.3) 28.2 Total trade and other receivables 875.6 908.7 • Level 2—Other techniques for which all inputs which have a sig Impact of currency translation 2.6 4.2 Of which: nificant effect on the recorded fair value are observable either As at 31 December 2019 316.6 467.0 Non-current 285.5 294.5 directly or indirectly; Current 590.1 614.2 • Level 3—Techniques which use inputs which have a significant 1 Other movements include reclassifications (between current and non-current, upfront and deferred, as well as against receivables) effect on the recorded fair value that are not based on observable market data. Movement in Deferred Income 2018 T66 Unbilled accrued revenue represents revenue recognised, but not billed, for satellite capacity under long-term contracts. Billing will The fair value of investments that are actively traded in organised EUR MILLION Non-current Current occur based on the terms of the contracts. The non-current balance financial markets is determined by reference to quoted market bid As at 1 January 2018 477.3 443.2 represents entirely unbilled accrued revenue. prices at the close of business on the reporting date. For investments Adoption of IFRS 15 - 14.0 where there is no active market, fair value is determined using valu Revenue recognised An amount of EUR 31.9 million (2018: EUR 25.0 million) was expensed ation techniques. Such techniques include using recent arm’s-length during the year - (1,377.3) in 2019 reflecting an increase in the impairment of trade and other market transactions; reference to the current market value of another New billings - 1,285.8 receivables. This amount is recorded in ‘Other operating charges’. As instrument, which is substantially the same; discounted cash flow Other movements1 (113.7) 101.1 at 31 December 2019, trade and other receivables with a nominal analysis and option pricing models. Impact of currency amount of EUR 112.8 million (2018: EUR 91.7 million) were impaired. translation 6.7 9.3 Movements in the provision for the impairment of trade and other As at 31 December 2019, the Group does not have any financial deriv As at 31 December 2018 370.3 476.1 receivables were as follows: atives. As at 31 December 2018, the Group had derivative financial instruments included in current assets of EUR 0.2 million and in cur 1 Other movements include reclassifications (between current and non-current, upfront and deferred, as well as against receivables) Movement in the Provision for the Impairment rent liabilities of EUR 0.1 million (all measured at fair value valuation of Trade and other Receivables T68 technique Level 2).
EUR MILLION 2019 2018 FAIR VALUES As at 1 January 91.7 71.8 Adoption of IFRS 9 - 6.4 The fair value of borrowings has been calculated with the quoted Increase in provision 43.6 45.6 market prices except for COFACE, Fixed Term Loan Facility (LuxGov ANNUAL REPORT 2019 REPORT ANNUAL Reversals of provision (11.7) (20.6) Sat) and the floating tranche of the Schuldschein Loan for which the
SES Utilised (11.7) (14.5) discounted expected future cash flows at prevailing interest rates has Impact of currency translation 0.9 3.0 been used. The fair value of foreign currency contracts is calculated As at 31 December 112.8 91.7 129 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
by reference to current forward exchange rates for contracts with similar maturity profiles. As at 31 December 2019 – Fair Values T69 Carried at Carried at All borrowings are measured at amortised cost. Financial assets and amortised cost fair value Total other financial liabilities measured at amortised cost, have a fair value that approximates their carrying amount. Set out below is a compar Fair value Carrying Carrying Balance EUR MILLION hierarchy amount Fair value amount Sheet ison by category of carrying amounts and fair values of all of the Group’s financial instruments that are carried in the financial state At fixed rates: ments. Eurobond 2020 (EUR 650 million) 2 649.9 655.5 - 649.9 Eurobond 2021 (EUR 650 million) 2 649.1 685.6 - 649.1 As at 31 December 2019 – Fair Values T69 US Bond 2023 (USD 750 million) 2 666.6 683.4 - 666.6 German Bond 2025 (EUR 250 million), non-listed 2 249.1 262.2 - 249.1 Carried at Carried at amortised cost fair value Total Eurobond 2026 (EUR 500 million) 2 494.8 517.4 - 494.8 Euro Private Placement 2027 (EUR 140 million) Fair value Carrying Carrying Balance issued under EMTN 2 139.6 168.4 - 139.6 EUR MILLION hierarchy amount Fair value amount Sheet Eurobond 2027 (EUR 500 million) 2 496.8 485.8 - 496.8 As at 31 December 2019 Fixed Term Loan Facility (LuxGovSat) 2 114.6 136.7 - 114.6 Financial assets German Bond 2032 (EUR 50 million), non-listed 2 49.9 60.3 - 49.9 Non-current financial assets: US Bond 2043 (USD 250 million) 2 215.6 209.1 - 215.6 Other financial assets 11.8 11.8 - 11.8 US Bond 2044 (USD 500 million) 2 432.2 422.5 - 432.2 Trade and other receivables 285.5 285.5 - 285.5 Total non-current financial assets 297.3 297.3 - 297.3 Total borrowings 4,428.3 4,558.5 - 4,428.3
Current financial assets: Non-current financial liabilities: 4,557.6 4,667.6 - 4,557.6 Trade and other receivables 590.1 590.1 - 590.1 Non-current borrowings 3,737.2 3,847.2 - 3,737.2 Derivatives 2 - - - - Lease liabilities 29.7 29.7 - 29.7 Cash and cash equivalents 1,155.3 1,155.3 - 1,155.3 Fixed assets suppliers 622.5 622.5 - 622.5 Total current financial assets 1,745.4 1,745.4 - 1,745.4 Other long term liabilities 168.2 168.2 - 168.2
Financial liabilities Current financial liabilities: 1,188.3 1,208.5 - 1,188.3 Borrowings: Current borrowings 691.1 711.3 - 691.1 At floating rates: Lease liabilities 11.2 11.2 - 11.2 Syndicated loan 20211 2 - - - - Fixed assets suppliers 134.8 134.8 - 134.8 COFACE 2 120.6 120.6 - 120.6 Derivatives 2 - - - - ANNUAL REPORT 2019 REPORT ANNUAL German Bond 2024 (EUR 150 million), non-listed 2 149.5 151.0 - 149.5 Trade and other payables 351.2 351.2 - 351.2 SES 1 As at 31 December 2019 no amount has been drawn down under this facility. As a consequence, the remaining balance of loan orig ination cost of the Syndicated Loan has been disclosed under prepaid expenses for an amount of EUR 3.8 million. 130 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
As at 31 December 2018 – Fair Values T70 As at 31 December 2018 – Fair Values T70
Carried at amortised Carried at Carried at amortised Carried at cost fair value Total cost fair value Total
Fair value Carrying Carrying Balance Fair value Carrying Carrying Balance EUR MILLION hierarchy amount Fair value amount Sheet EUR MILLION hierarchy amount Fair value amount Sheet As at 31 December 2018 Euro Private Placement 2027 (EUR 140 million) Financial assets issued under EMTN 2 139.6 168.5 - 139.6 Non-current financial assets: Fixed Term Loan Facility (LuxGovSat) 2 115.0 122.8 - 115.0 Other financial assets 6.5 6.5 - 6.5 Trade and other receivables 294.5 294.5 - 294.5 Total borrowings 4,384.9 4,404.2 - 4,384.9 Total non-current financial assets 301.0 301.0 - 301.0 Non-current financial liabilities: 4,271.9 4,289.1 - 4,271.9 Current financial assets: Non-current borrowings 3,908.5 3,925.7 - 3,908.5 Trade and other receivables 614.2 614.2 - 614.2 Lease liabilities 28.6 28.6 28.6 Derivatives 2 - - 0.2 0.2 Fixed assets suppliers 200.9 200.9 - 200.9 Cash and cash equivalents 909.1 909.1 - 909.1 Other long term liabilities 133.9 133.9 - 133.9 Total current financial assets 1,523.3 1,523.3 0.2 1,523.5 Current financial liabilities: 984.2 986.3 0.1 984.3
Financial liabilities Current borrowings 476.4 478.5 - 476.4 Borrowings: Lease liabilities 9.5 9.5 - 9.5 At floating rates: Fixed assets suppliers 130.8 130.8 - 130.8 Syndicated loan 20211 2 - - - - Derivatives 2 - - 0.1 0.1 COFACE 2 160.8 161.1 - 160.8 Trade and other payables 367.5 367.5 - 367.5 German Bond 2024 (EUR 150 million), non-listed 2 149.4 145.5 - 149.4 1 As at 31 December 2018 no amount has been drawn down under this facility. As a consequence, the remaining balance of loan orig ination cost of the Syndicated Loan has been disclosed under prepaid expenses for an amount of EUR 0.5 million.
At fixed rates: US Bond 2019 (USD 500 million) 2 435.2 434.2 - 435.2 Eurobond 2020 (EUR 650 million) 2 649.1 684.2 - 649.1 Eurobond 2021 (EUR 650 million) 2 648.4 708.5 - 648.4 US Bond 2023 (USD 750 million) 2 653.4 640.0 - 653.4 German Bond 2025 (EUR 250 million), non-listed 2 249.0 244.4 - 249.0 Eurobond 2026 (EUR 500 million) 2 494.1 477.6 - 494.1
ANNUAL REPORT 2019 REPORT ANNUAL US Bond 2043 (USD 250 million) 2 213.6 185.1 - 213.6 US Bond 2044 (USD 500 million) 2 427.5 371.3 - 427.5 SES German Bond 2032 (EUR 50 million), non-listed 2 49.8 61.0 - 49.8 131 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 18—FINANCIAL RISK MANAGE- The Group operates a centralised treasury function which manages, grammes and the EMTN Programme (EUR 4,260.0 million as at MENT OBJECTIVES AND POLICIES among others, the liquidity of the Group in order to optimise the fund 31 December 2019 and EUR 4,760.0 million as at 31 December 2018— ing costs. This is supported by a daily cash pooling mechanism. more details in ›› note 23). The Group’s financial instruments, other than derivatives, comprise: a syndicated loan, Eurobonds, US dollar bonds (144A), a euro-domi Liquidity is monitored regularly through a review of cash balances, The table below summarises the projected contractual undiscounted nated Private Placement, German Bonds (‘Schuldschein’), drawings the drawn and issued amounts and the availability of additional fund cash flows based on the maturity profile as at 31 December 2019 under Coface and under a committed credit facility for specified sat ing under committed credit lines, the two commercial paper pro and 2018. ellites under construction, cash and short-term deposits. Projected Contractual Undiscounted Cash Flows based on Maturity Profile as at 31 December 2019 T71 The main purpose of the debt instruments is to raise funds to finance EUR MILLION Within 1 year Between 1 and 5 years After 5 years Total the Group’s day-to-day operations, as well as for other general busi ness purposes. The Group has various other financial assets and lia As at 31 December 2019: bilities such as trade receivables and trade payables, which arise Borrowings 691.2 1,548.6 2,222.6 4,462.4 directly from its operations. Future interest commitments 151.3 347.2 747.5 1,246.0 Trade and other payables 351.2 - - 351.2 The main risks arising from the Group’s financial instruments are Other long-term liabilities - 168.2 - 168.2 liquidity risks, foreign currency risks, interest rate risks and credit Lease liabilities 12.4 29.1 6.2 47.7 risks. The general policies are periodically reviewed and approved by Fixed assets suppliers 134.8 622.5 - 757.3 the board. Total maturity profile 1,340.9 2,715.6 2,976.3 7,032.8
LIQUIDITY RISK As at 31 December 2018: Borrowings 477.9 2,126.4 1,810.7 4,415.0 The Group’s objective is to efficiently use cash generated so as to Future interest commitments 151.8 413.0 778.8 1,343.6 maintain borrowings at an appropriate level. In case of liquidity needs, Trade and other payables 367.5 - - 367.5 the Group can call on uncommitted loans, commercial paper programs Other long-term liabilities - 133.9 - 133.9 and a committed syndicated loan. In addition, if deemed appropriate Lease liabilities 10.2 25.7 5.3 41.2 based on prevailing market conditions, the Group can access addi tional funds through the European Medium-Term Note programme. Fixed assets suppliers 130.8 200.9 - 331.7 The Group’s debt maturity profile is tailored to allow the Company Total maturity profile 1,138.2 2,899.9 2,594.8 6,632.9 and its subsidiaries to cover repayment obligations as they fall due. ANNUAL REPORT 2019 REPORT ANNUAL SES 132 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
FOREIGN CURRENCY RISK Hedge of net investment in foreign operations The following table demonstrates the sensitivity to a +/- 20% change As at 31 December 2019 and 2018, certain borrowings denominated in the US dollar exchange rate on the nominal amount of the Group’s SES is active in markets outside the Eurozone, with business opera in US dollars were designated as hedges of the net investments in US dollar net investment, with all other variables held constant. All tions in many locations throughout the world. Consequently, SES uses SES Global Americas Inc. and its subsidiaries (‘SES Americas’), SES value changes are eligible to be recorded in other comprehensive certain financial instruments to manage its foreign currency exposure. Holdings (Netherlands) BV and its subsidiaries (‘SES Netherlands’), account with no impact on profit and loss. Derivative financial instruments are used mainly to reduce the Group’s SES Satellite Leasing Limited, MX1 Ltd in Israel and the operational exposure to market risks resulting from fluctuations in foreign entities providing the O3b MEO services (‘O3b Networks’) to hedge Sensitivity to a +/– 20% change in exchange rates by ceating offsetting exposures. SES is not a party to the Group’s exposure to foreign exchange risk on these investments. US Dollar Exchange Rate 2019 T73 leveraged derivatives and, as a matter of policy, does not use deriva tive financial instruments for speculative purposes. As at 31 December 2019, all designated net investment hedges were Amount in EUR million Amount in Amount in assessed to be highly effective and a total loss of EUR 19.7 million, Amount at closing EUR million EUR million The Group has significant foreign operations whose functional cur stated net of tax of EUR 6.8 million is included as part of other com in USD rate of at rate of at rate of rency is not the euro. The primary currency exposure in terms of for prehensive income for the period (2018: loss EUR 57.9 million net of 31 December 2019 million 1.1234 1.3500 0.9000 eign operations is the US dollar and the Group has designated certain tax of EUR 21.1 million). USD statement of financial position US dollar-denominated debt as net investment hedges of these oper exposure: ations. The Group has a corresponding exposure in the consolidated The following table sets out the hedged portion of USD statement of SES Americas 2,415.7 2,150.3 1,789.4 2,684.1 income statement: 50.5% (2018: 48.7%) of the Group’s sales and 52.9% financial position exposure as at 31 December: SES Netherlands 1,502.8 1,337.7 1,113.2 1,669.8 (2018: 51.7%) of its operating expenses being denominated in US dol Hedged Portions of USD Statement SES Satellite Leasing lars. The Group does not enter into derivative instruments to hedge Limited 1,061.8 945.2 786.5 1,179.8 these currency exposures. of Financial Position Exposure T72 MX1 Ltd, Israel 104.9 93.4 77.7 116.6 USD MILLION 2019 2018 O3b Networks 2,816.1 2,506.8 2,086.0 3,129.0 The Group uses predominantly forward currency contracts to elimi Total 7,901.3 7,033.4 5,852.8 8,779.3 nate or reduce the currency exposure arising from individual capital USD statement of financial position exposure: expenditure projects, such as satellite procurements, tailoring the SES Americas 2,415.7 2,369.7 maturities to each milestone payment to maximise effectiveness. SES Netherlands 1,502.8 1,535.7 Hedged with: Depending on the functional currency of the entity with the capital SES Satellite Leasing Limited 1,061.8 1,130.4 US Bonds 1,500.0 1,335.2 1,111.1 1,666.7 expenditure commitment, the foreign currency risk might be in euro MX1 Ltd, Israel 104.9 162.3 Other external borrowings - - - - or in the US dollar. The forward contracts are in the same currency O3b Networks 2,816.1 2,385.7 Total 1,500.0 1,335.2 1,111.1 1,666.7 as the hedged item and can cover up to 100% of the total value of the Total 7,901.3 7,583.8 contract. It is the Group’s policy not to enter into forward contracts Hedged proportion 19% until a firm commitment is in place. Hedged with: Absolute difference US Bonds 1,500.0 2,000.0 without hedging (1,180.6) 1,745.9 Total 1,500.0 2,000.0 Absolute difference with hedging (956.5) 1,414.4
ANNUAL REPORT 2019 REPORT ANNUAL Hedged proportion 19% 26% SES 133 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Sensitivity to a +/– 20% change in INTEREST RATE RISK decrease of 10 basis points (2018: increase of 25 basis points or a US Dollar Exchange Rate 2018 T74 decrease of nil basis points). The Group’s exposure to market interest rate risk relates primarily to Amount in EUR million Amount in Amount in the Group’s debt portion at floating rates. In order to mitigate this risk, Euro Interest Rates T76 at closing EUR million EUR million the Group is generally seeking to contract as much as possible of its Floating Increase in Decrease in Amount in rate of at rate of at rate of debt outstanding at fixed interest rates, and is carefully monitoring USD million 1.1450 1.3700 0.9200 rate bor- rates Pre- rates Pre- the evolution of market conditions, adjusting the mix between fixed EUR MILLION rowings tax impact tax impact 31 December 2018 and floating rate debt if necessary. To mitigate the Group’s interest Borrowings at 31 December 2019 270.1 0.0 0.3 USD statement of rate risk in connection with near-term debt refinancing needs, the financial position Borrowings at 31 December 2018 310.2 (0.8) 0.0 exposure: Group may from time to time enter into interest rate hedges through SES Americas 2,369.7 2,069.6 1,729.7 2,575.8 forward contracts denominated in EUR and USD. As per 31 December SES Holdings (Neth- 2019 and 31 December 2018, the Group had no interest rate hedges erlands) BV 1,535.7 1,341.2 1,120.9 1,669.2 outstanding. CREDIT RISK SES Satellite Leasing Limited 1,130.4 987.2 825.1 1,228.7 The table below summarises the split of the nominal amount of the Risk management MX1 Ltd, Israel 162.3 141.7 118.5 176.4 Group’s debt between fixed and floating rate. The Group has two types of financial assets that are subject to the SES Networks Lux expected credit loss model: trade receivables and unbilled accrued Sarl 1,701.6 1,486.1 1,242.0 1,849.6 Split of the Nominal Amount of the Group’s Debt revenue. O3b Networks 684.1 597.5 499.3 743.6 between Fixed and Floating Rate T75 Total 7,583.8 6,623.3 5,535.5 8,243.3 While cash and cash equivalents are also subject to impairment test At fixed At floating EUR MILLION rates rates Total ing, there was no impairment loss identified as at 31 December 2019. Hedged with: Borrowings at 31 December 2019 4,158.2 270.1 4,428.3 US Bonds 2,000.0 1,746.7 1,459.9 2,173.9 It is the Group’s policy that all customers who wish to trade on credit Borrowings at 31 December 2018 4,074.7 310.2 4,384.9 Total 2,000.0 1,746.7 1,459.9 2,173.9 terms are subject to credit verification procedures. To measure the expected credit losses, trade receivables and unbilled accrued reve Hedged proportion 26% nue have been grouped based on shared credit risk characteristics, In the course of 2019 the Group repaid a maturing USD 500.0 million country and the days past due. The unbilled accrued revenues have Absolute difference without hedging (1,087.8) 1,620.0 senior bond and a total amount of EUR 41.2 million related to various substantially the same risk characteristics as the trade receivables Absolute difference Coface instalments. for the same types of contracts. The Group has therefore concluded with hedging (801.0) 1,192.8 that the expected loss rates for trade receivables are a reasonable The following table demonstrates the sensitivity of the Group’s pre- approximation of the loss rates for the unbilled accrued revenue. tax income to reasonably possible changes in interest rates affecting the interest charged on the floating rate borrowings. All other varia The credit verification procedures in relation to the assets above bles are held constant. include the assessment of the creditworthiness of the customer by using sources of quality information such as external specialist ANNUAL REPORT 2019 REPORT ANNUAL The Group believes that a reasonably possible development in the reports, audited annual reports, press articles or rating agencies.
SES Eurozone interest rates would be an increase of nil basis points or a 134 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Should the customer be a governmental entity, the official debt rating Impairment of Trade Receivables and The provision in respect of unbilled accrued revenue as at 31 Decem of the respective country is a key driver in determining the appropri Unbilled Accrued Revenues 2019 T77 ber 2019 amounts to EUR 18.8 million and the corresponding expected ate credit risk category. credit loss is 4.6% (31 December 2018: EUR 25.3 million and the cor Less Between More than 1 1 and 3 than 3 responding expected credit losses is 6.1%). Following this credit analysis, the customer is classified into a credit EUR MILLION Current month months months Total risk category which can be as follows: ‘Prime’ (typically publicly rated 31 December 2019 The movement in provisions for trade receivables and unbilled and listed entities), ‘Market’ (usually higher growth companies with Average expected accrued revenue as at 31 December 2019 and 2018 are as follows: higher leverage) or ‘Sub-prime’ (customers for which viability is depend loss rate ent on continued growth with higher leverage). The credit profile is (by portfolio) 3.3% 4.0% 6.7% 12.1% Movement in Provisions for Trade Receivables and updated at least once a year for all customers with an ongoing con Gross carrying Unbilled Accrued Revenue T79 amount—trade tractual relationship with annual revenues over EUR/USD 1 million or receivables 243.6 55.1 71.0 155.8 525.5 Provisions for Provisions for the equivalent in any other currency. Provision 0.1 0.1 0.2 5.0 5.4 trade unbilled accrued receivables revenue Impairment of trade receivables and unbilled accrued revenues Impairment of Trade Receivables and EUR MILLION 2019 2018 2019 2018 The Group applies the IFRS 9 simplified approach to measuring Unbilled Accrued Revenues 2018 T78 Opening provision as at expected credit losses for trade receivables and unbilled accrued rev 1 January 2018— calculated under IFRS 9 66.4 57.1 25.3 21.1 enue by measuring the loss allowance at an amount equal to lifetime Less Between More than 1 1 and 3 than 3 Increase in provision expected credit losses. To measure the expected credit losses, trade EUR MILLION Current month months months Total recognised in profit or loss receivables and unbilled accrued revenue have been grouped in port during the year 38.8 38.5 4.8 7.1 31 December 2018 folios based on shared credit risk characteristics (credit risk profile: Average expected Receivables written off Prime, Market and Sub-prime), country and the days past due. loss rate during the year (by portfolio) 2.8% 3.2% 5.1% 7.2% as uncollectible (4.0) (14.5) (7.7) - In order to compute the provision, the gross trade receivables balance Gross carrying Unused amount reversed (7.7) (16.6) (4.0) (4.0) is reduced for any portion representing deferred revenue, any secu amount—trade Impact of currency receivables 248.5 58.0 63.4 139.6 509.5 translation 0.5 1.9 0.4 1.1 rities held and any applicable credit limit provided by credit insurance. Trade receivables are written off when there is no reasonable expec Provision 0.3 0.2 1.0 2.4 3.8 At 31 December 94.0 66.4 18.8 25.3 tation of recovery. The Group’s largest customers are large media companies and government agencies and hence the credit risk asso ciated with these contracts is assessed as low. Additional provisions are recorded for trade receivables balances if specific circumstances or forward-looking information lead the Group The Company calculates loss expectancy rates based on the history to believe that additional collectability risk exists with respect to custom of losses and forward-looking information to create a provision ers that are not reflected in the loss expectancy rates. An additional matrix. On that basis, the provision as at 31 December 2019 and provision for trade receivables of EUR 88.6 million has been recorded 31 December 2018 is as follows: as at 31 December 2019 (31 December 2018: EUR 62.6 million). ANNUAL REPORT 2019 REPORT ANNUAL SES 135 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
FINANCIAL CREDIT RISK NOTE 19—CASH AND Issued Capital T81 CASH EQUIVALENTS Class A Class B Total With respect to the credit risk relating to financial assets, this expo shares shares shares sure relates to the potential default of the counterparty, with the max Cash and Cash Equivalents T80 As at 1 January 2019 383,457,600 191,728,800 575,186,400 imum exposure being equal to the carrying amount of these instru Shares issued during the year - - - ments. The counterparty risk from a cash management perspective EUR MILLION 2019 2018 As at 31 December 2019 383,457,600 191,728,800 575,186,400 is reduced by the implementation of several cash pools, accounts and Cash at bank and in hand 398.0 542.2 related paying platforms with different counterparties. Short-term deposits 757.3 366.9 Class A Class B Total Total cash and cash equivalents 1,155.3 909.1 shares shares shares To mitigate the counterparty risk, the Group only deals with recog As at 1 January 2018 383,457,600 191,728,800 575,186,400 nised financial institutions with an appropriate credit rating—gener Shares issued during the year - - - ally ‘A’ and above—and in adherence of a maximum trade limit for Cash at banks is subject to interest at floating rates based on daily As at 31 December 2018 383,457,600 191,728,800 575,186,400 each counterparty which has been approved for each type of trans bank deposit rates. Short-term deposits are made for varying periods actions. All counterparties are financial institutions which are regu between one day and three months depending on the immediate cash lated and controlled by the national financial supervisory authorities requirements of the Group, and earn interest at the respective short- of the associated countries. The counterparty risk portfolio is analysed term deposit rates. Short-term deposits and cash at bank and in hand Fiduciary Deposit Receipts (‘FDRs’) with respect to Class A shares on a quarterly basis. Moreover, to reduce this counterparty risk the are held at various financial institutions meeting the credit rating cri are listed on the Luxembourg Stock Exchange and on Euronext Paris. portfolio is diversified as regards the main counterparties ensuring a teria set out in ›› note 18 above. They can be traded freely and are convertible into Class A shares at well-balanced relation for all categories of products (derivatives as any time and at no cost at the option of the holder under the condi well as deposits). As at 31 December 2019, an amount of EUR 17.1 million (2018: tions applicable in the Company’s articles of association and in EUR 15.4 million) is invested in money market funds which qualify as accordance with the terms of the FDRs. CAPITAL MANAGEMENT cash and cash equivalents and is included in short-term deposits. All Class B shares are currently held by the State of Luxembourg, or The Group’s policy is to attain, and retain, a stable BBB- rating with NOTE 20—SHAREHOLDERS’ EQUITY by Luxembourg public institutions. Dividends paid for one share of Standard & Poor’s and a stable Baa2 rating with Moody’s. This invest Class B equal 40% of the dividend for one share of Class A. ment grade rating serves to maintain investors, creditors, rating ISSUED CAPITAL agency and market confidence. Within this framework, the Group A shareholder, or a potential shareholder, who seeks to acquire, manages its capital structure and liquidity in order to reflect changes SES has a subscribed capital of EUR 719.0 million (2018: EUR 719.0 mil directly or indirectly, more than 20% of the shares of the Company in economic conditions to keep its cost of debt low, maintain the con lion), represented by 383,457,600 class A shares (2018: 383,457,600 must inform the Chairman of the Board of Directors of the Company fidence of debt investors at a high level and to create added value for class A shares) and 191,728,800 class B shares (2018: 191,728,800 of such intention. The Chairman of the Board of Directors of the Com the shareholder. The Group’s dividend policy takes into account the class B shares) with no par value. pany shall forthwith inform the government of the Grand Duchy of financial performance of the year, cash flow developments and other Luxembourg of the envisaged acquisition which may be opposed by factors such as yield and pay-out ratio. The movement between the opening and closing number of shares the government within three months from such information should issued per class of share can be summarised as follows: the government determine that such acquisition would be against the general public interest. In case of no opposition from the government, ANNUAL REPORT 2019 REPORT ANNUAL the Board shall convene an extraordinary meeting of shareholders
SES which may decide at a majority provided for in article 450-3 of the 136 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
law of 10 August 1915, as amended, regarding commercial companies, EUR 550 MILLION DEEPLY SUBORDINATED OTHER RESERVES to authorise the shareholder, or potential shareholder, to acquire more FIXED RATE RESETTABLE SECURITIES than 20% of the shares. If it is an existing shareholder of the Company, In accordance with Luxembourg legal requirements, a minimum of it may attend the general meeting and will be included in the count In 2016 SES issued a second perpetual bond of EUR 550,000,000 (the 5% of the yearly statutory net profit of the Company is transferred to for the quorum but may not take part in the vote. ‘EUR 550.0 million perpetual bond’) at a coupon of 5.625 percent to a legal reserve which is non-distributable. This requirement is satis the first call date, a price of 99.304 and a yield of 5.75 percent. Trans fied when the reserve reaches 10% of the issued share capital. As BUY-BACK OF TREASURY SHARES action costs related to this transaction amounted to EUR 7.6 million at 31 December 2019 a legal reserve of EUR 71.9 million (2018: and have been deducted from ‘Other reserves’. This brought the EUR 70.0 million) is included within other reserves. SES has historically, in agreement with the shareholders, purchased aggregate perpetual bond issued by the Group to EUR 1,300 million. FDRs in respect of ‘Class A’ shares in connection with executives’ and SES is entitled to call the EUR 550 million perpetual bond on 29 Jan Other reserves include a non-distributable amount of EUR 90.0 mil employees’ share-based payments plans as well as for cancellation. uary 2024 and on subsequent coupon payment dates. lion (2018: EUR 93.4 million) linked to treasury shares, and an amount At the year-end, the Company held FDRs relating to the above of EUR 227.9 million (2018: EUR 229.4 million) representing the net schemes as set out below. These FDRs are disclosed as treasury As the Company has no obligation to redeem either of the bonds, and worth tax reserve for 2013-2019, for which the distribution would result shares in the balance sheet and are carried at acquisition cost as a the coupon payments are discretionary, it classified the net proceeds in the payment of net worth tax at a rate of up to 20% of the distrib deduction of equity. from the issuance of the securities (together EUR 1,281.9 million net uted reserve in accordance with Luxembourg law requirements. of transaction costs and tax) as equity. The perpetual bonds are guar Buy-Back of Treasury Shares T82 anteed on a subordinated basis by SES Global Americas Holdings GP. NOTE 21—NON-CONTROLLING INTEREST SES used the net proceeds from the offerings for the repayment of 2019 2018 O3b debt, the repayment of certain existing indebtedness of the Set out below is the summarised financial information for each sub FDRs held as at 31 December 4,708,584 5,589,589 Group, as well as for general corporate purposes. sidiary that has non-controlling interests (NCI) that are material to Carrying value of FDRs held the Group. The amounts disclosed for each subsidiary are before (EUR million) 90.0 132.1 Coupon payments in respect of the two perpetual bonds occurred on inter-company eliminations. 2 January 2019 (EUR 34.7 million) and 29 January 2019 (EUR 30.9 mil lion) and have been deducted from ‘Other reserves’. The correspond EUR 750 MILLION DEEPLY SUBORDINATED ing payments in 2018 were on 2 January 2018 (EUR 34.7 million) and FIXED RATE RESETTABLE SECURITIES 29 January 2018 (EUR 30.9 million) and were also deducted from “Other reserves”. In 2016 SES issued EUR 750,000,000 Deeply Subordinated Fixed Rate Resettable Securities (the ‘EUR 750.0 million perpetual bond’) at a Tax on the perpetual bond coupon accrual of EUR 18.0 million (2018: coupon of 4.625 percent to the first call date, a price of 99.666 and a EUR 18.8 million) has been credited to ‘Other reserves”. yield of 4.7 percent. Transaction costs related to this transaction amounted to EUR 19.8 million and have been deducted from ‘Other reserves’. SES is entitled to call the EUR 750.0 million perpetual bond on 2 January 2022 and on subsequent coupon payment dates. ANNUAL REPORT 2019 REPORT ANNUAL SES 137 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Summarised Financial Information for each Subsidiary that has Summarised Financial Information for each Subsidiary that has Non-Controlling Interests: Balance Sheet T83 Non-Controlling Interests: Cash Flows T85
Al Maisan Satellite Ciel Satellite Limited Al Maisan Satellite Ciel Satellite Limited LuxGovSat S.A. Communications LLC, Partnership, Canada LuxGovSat S.A. Communications LLC, Partnership, Canada EUR MILLION (50% NCI)2 UAE (65% NCI)1 (30% NCI in 2018)3 EUR MILLION (50% NCI) UAE (65% NCI) (30% NCI in 2018)
Summarised balance sheet 2019 2018 2019 2018 2018 Summarised cash flows 2019 2018 2019 2018 2018 Current assets 32.4 31.3 11.8 22.6 3.6 Cash flows from/(absorbed by) Current liabilities (4.6) (5.8) (2.6) (5.5) (4.9) operating activities 3.5 8.6 0.3 (1.4) 23.4 Cash flows from/(absorbed by) Current net assets 27.8 25.5 9.2 17.1 (1.3) investing activities (0.0) (17.6) 0.0 (0.0) (0.7) Cash flows from/(absorbed by) Non-current assets 191.9 208.1 4.7 51.4 49.0 financing activities 3.7 10.4 - 0.2 (20.8) Non-current liabilities (116.3) (116.3) - - - Net foreign exchange movements - - 0.1 0.4 - Non-current net assets 75.6 91.8 34.7 51.4 49.0 Net increase/(decrease) in cash and cash equivalents 7.2 1.4 0.4 (0.8) 1.9 Net assets 103.4 117.3 43.9 68.5 47.7 Accumulated NCI 51.7 58.6 28.5 44.5 14.2 Transactions with non-controlling interests - - - - (14.2) TRANSACTIONS WITH NON-CONTROLLING INTERESTS 1 The Group, as of 31 December 2019 and 31 December 2018, has majority of the voting rights on the Board of Directors of the Com pany, i.e. 3 members out of 5 or 60% (Note 2) 2 Please refer to note 2 for more details In 2018 SES put in place an agreement with the minority partner hold 3 Please refer to paragraph “Transactions with non-controlling interests” for more details ing 30% interest in Ciel Satellite Limited Partnership, according to which SES will distribute to the minority partner a fixed amount per Summarised Financial Information for each Subsidiary that has month over a five-year period. Thus, the variable stream that the Non-Controlling Interests: Statement of Comprehensive Income T84 minority partner was previously receiving based on Ciel Satellite Lim Al Maisan Satellite Ciel Satellite Limited ited Partnership’s business developments, has been replaced with a LuxGovSat S.A. Communications LLC, Partnership, Canada fixed stream. EUR MILLION (50% NCI) UAE (65% NCI) (30% NCI in 2018) As the minority partner is no longer subject to variable returns and Summarised statement of comprehensive income 2019 2018 2019 2018 2018 has no interest in the residual assets of Ciel Satellite Limited Partner Revenue 19.4 22.2 7.1 16.4 39.3 ship, the non-controlling interest amounting to EUR 14.2 million as at 31 December 2018 has been fully reversed. Operating expenses (13.3) (12.8) (15.3) (22.1) (2.3) Profit/(loss) for the period (13.9) 24.2 (19.8) (18.3) (23.2)
ANNUAL REPORT 2019 REPORT ANNUAL Other comprehensive income - - - - - Total comprehensive income (13.9) 24.2 (19.8) (18.3) (23.2) SES Profit/(loss) allocated to NCI (6.9) 12.1 (12.9) (11.9) (7.0) Dividend paid to NCI - - - - 6.2 138 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 22—SHARE-BASED Movements in the number of share options outstanding and their 2) Simulated Restricted Stock Units (SRSU) COMPENSATION PLANS related weighted average exercise prices in euro are as follows: In 2017, the Group entered into a new compensation plan, which will progressively replace the STAR Plan. Simulated Restricted The Group has four share-based compensation plans which are Stock Appreciation Rights Plan: Movements in the Stock Units (SRSU) are cash-settled awards which will be deliv detailed below. In the case of the Stock Appreciation Rights Plan and Number of Share Options Outstanding and their ered on 1 June following a three-year vesting period and are set Equity Incentive Compensation Plan the relevant strike price is Related Weighted Average Exercise Price T87 tled in cash. The liability for the cash-settled awards is measured defined as the average of the market price of the underlying shares initially and at the end of each reporting period until settled, at 2019 2018 over a period of 15 trading days before the date of the grant. Average Average the fair value of the share appreciation rights, taking into account exercise exercise the terms and conditions on which the stock appreciation rights 1) The Stock Appreciation Rights Plan (‘STAR Plan’) price per price per were granted and recognised to the extent to which the employ share Number of share Number of The STAR Plan is an equity-settled plan available to non-exec option options option options ees have rendered services to date. utive staff of Group subsidiaries, where share options are granted. As at 1 January 25.01 2,154,927 25.02 2,306,003 In January 2011, the STAR Plan was amended and, for all options During 2019, 333,049 SRSUs have granted (2018: 415,761). During granted 2011 onwards, a third of the share options vest and can Forfeited 20.71 (560,387) 25.71 (139,162) the same period, 91,073 SRSUs have been forfeited (2018: 56,658) be exercised each year. After being fully vested, the share options Exercised - - 17.83 (11,914) and 9,375 SRSUs have been vested (2018: 2,840). An accrual have a four-year exercise period. At 31 December 26.52 1,594,540 25.01 2,154,927 amounting to EUR 5,474,458 has been recognized in the consol idated income statement as ‘staff costs’ as at 31 December 2019 Stock Appreciation Rights Plan T86 (31 December 2018: EUR 3,558,351) based on the 858,729 out Share options outstanding at the end of the year have the following standing SRSUs (31 December 2018: 626,128) measured at the 2019 2018 expiry date and exercise prices in euro: Group’s share price at the end of the year on a pro-rata basis Outstanding options at the end of the year 1,594,540 2,154,927 over 3 years vesting period. Weighted average exercise price in euro 26.52 25.01 Stock Appreciation Rights Plan: Share Options Outstanding at the End of The Year T88 3) Equity Incentive Compensation Plan (‘EICP’) The EICP is available to Group executives. Under the plan, Exercise price All of the 1,594,540 outstanding options as at 31 December 2019 (2018: per share Number of options are granted with an effective date of 1 or 6 of January. 2,154,927), are fully vested and exercisable. No options were exercised Grant Expiry date options options One-quarter or one fifth of the entitlement vests on each anni in 2019, while in 2018 the exercised options resulted in 11,914 treasury versary date of the original grant. Once vested, the options can shares being delivered at a weighted average price of EUR 17.83. On 2019 2018 be exercised until the tenth anniversary of the original grant. In average, in 2018, the related weighted average share price at the time 2016 2023 24.39 544,459 603,910 2019, the plan was renamed to Equity Based Compensation Plan of exercise was EUR 19.63 per share. 2015 2022 32.73 350,047 390,881 (‘EBCP Option’). 2014 2021 26.5 368,394 412,864 2013 2020 23.51 331,640 366,033 Equity Incentive Compensation Plan T89 2012 2019 18.1 0 256,154 2019 2018 2011 2019 17.57 0 125,085 Outstanding options at the end of the year 14,908,795 14,311,080 1,594,540 2,154,927 ANNUAL REPORT 2019 REPORT ANNUAL Weighted average exercise price in euro 18.60 19.22 SES 139 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Out of 14,908,795 outstanding options as at 31 December 2019 Share options outstanding at the end of the year have the following 4) Long-term Incentive programme (‘LTI’) (31 December 2018: 14,311,080), 9,699,314 options are exercisable expiry date and exercise prices in euro: The LTI Plan is also a programme for executives, and senior exec (31 December 2018: 7,871,276). Options exercised in 2019 resulted in utives, of the Group. Under the plan, restricted shares are allo 358,293 Treasury shares (2018: 143,150) being delivered at a weighted Equity Incentive Compensation Plan: cated to executives at the beginning of May each year and these average price of EUR 13.03 each (2018: 13.31). Expiry Date and Exercise Prices T91 vest on the 1 June following the third anniversary of the grant. Senior executives also have the possibility to be allocated per Exercise price The related weighted average share price at the time of exercise per share Number of formance shares whose granting is dependent on the achieve during 2019 was EUR 16.91 (2018: EUR 15.97) per share. Grant Expiry date options options ment of defined performance criteria which are a) individual objectives and b) the economic value added (‘EVA’) target estab Movements in the number of share options outstanding and their 2019 2018 lished by the Board from time to time. These shares also vest on related weighted average exercise prices in euro are as follows: 2019 2029 15.01 2,408,747 - the 1 June following the third anniversary of the original grant. 2018 2028 18.23 407,000 - In 2019, the plan was renamed to Equity Based Compensation Equity Incentive Compensation Plan: Movements in 2018 2028 12.67 4,792,760 5,686,736 Plan, comprising performance shares (‘EBCP PS’) and restricted the Number of Share Options Outstanding and their 2017 2027 21.15 2,705,797 3,136,922 shares (‘EBCP RS’). related Weighted Average Exercise Prices T90 2016 2026 24.39 2,032,260 2,384,490 Long-term Incentive Programme T92 2019 Aver- 2018 Average 2015 2025 32.73 848,352 986,269 age exercise exercise 2014 2024 26.5 687,230 791,159 2019 2018 price per Number of price per Number of 2013 2023 23.51 354,804 408,105 share option options share option options Restricted and performance shares outstanding 2012 2022 18.1 332,892 371,738 at the end of the year 1,546,366 1,578,505 At 1 January 19.22 14,311,080 23.62 9,727,470 2011 2021 17.57 233,387 259,311 Weighted average fair value in euro 12.46 14.02 Granted 15.47 2,927,606 12.67 5,796,083 2010 2020 17.96 105,566 124,943 Forfeited 19.45 (1,971,598) 24.54 (1,069,323) 2009 2019 13.47 - 104,792 Exercised 13.03 (358,293) 13.31 (143,150) 2008 2019 14.4 - 38,341 At 31 December 18.60 14,908,795 19.22 14,311,080 During 2019, 194,385 restricted shares (2018: 203,890) and 379,305 2007 (2018: 594,645) performance shares have been granted. On the same non-US 2019 14.32 - 5,584 period, 47,773 restricted shares (2018: 23,113) and 122,844 perfor 2007 US 2019 15.56 - 12,690 mance shares (2018: 58,410) have forfeited, 210,984 performance 14,908,795 14,311,080 shares (2018: 163,350) and 224,228 restricted shares (2018: 74,817) have been exercised.
The fair value of equity-settled shares (restricted and performance shares) granted is estimated as at the date of grant using a binomial model for STARs and EICP and a Black & Scholes model for LTI, tak ing into account the terms and conditions upon which the options (restricted and performance shares) were granted. The following table ANNUAL REPORT 2019 REPORT ANNUAL lists the average value of inputs to the model used for the years ended
SES 31 December 2019, and 31 December 2018. 140 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Long-term Incentive Programme: average Value NOTE 23—INTEREST-BEARING BORROWINGS of Inputs to the Model used for 2019 T93 As at 31 December 2019 and 2018, the Group’s interest-bearing borrowings were: EBCP PS 2019 EBCP Option and EBCP RS Dividend yield (%) 6.35% 5.94% Interest-Bearing Borrowings 2019 T95 Interest-Bearing Borrowings 2018 T96 Expected volatility (%) 30.47% 34.82% Amounts Amounts Risk-free interest rate (%) -0.47% -0.62% outstanding outstanding Effective 2019, carried Effective 2018, carried Expected life of options (years) 10 3 interest at amortised interest at amortised Share price at inception (EUR) 15.38 15.38 EUR MILLION rate Maturity cost EUR MILLION rate Maturity cost Fair value per option/share (EUR) 2.16-2.26 12.86 Non-current Non-current Total expected cost for each plan Eurobond 2021 (EUR 650 million) 4.75% March 2021 649.1 Eurobond 2020 (EUR 650 million) 4.625% March 2020 649.1 (EUR million) 4.98 4.89 EURIBOR Various Eurobond 2021 (EUR 650 million) 4.75% March 2021 648.4 COFACE 6M + 1.70% 2021—2022 79.4 EURIBOR Various US Bond (USD 750 million) 3.60% April 2023 666.6 COFACE 6M + 1.70% 2020—2022 119.6 Long-term Incentive Programme: average Value German bond (EUR 150 million), EURIBOR US Bond (USD 750 million) 3.60% April 2023 653.4 of Inputs to the Model used for 2018 T94 non-listed 6M + 0.80% June 2024 149.5 German bond (EUR 150 million), EURIBOR 2018 EICP LTI German bond (EUR 250 million), December non-listed 6M + 0.80% June 2024 149.4 non-listed 1.71% 2025 249.1 German bond (EUR 250 million), December 7.89%, Eurobond 2026 (EUR 500 million) 1.625% March 2026 494.8 non-listed 1.71% 2025 249.0 Dividend yield (%) 7.99% 7.89% Euro Private Placement 2027 Eurobond 2026 (EUR 500 million) 1.625% March 2026 494.1 Expected volatility (%) 27.37% 31.73% (EUR 140 million issued Euro Private Placement 2027 Risk-free interest rate (%) -0.06%, -0.43% -0.43% under EMTN) 4.00% May 2027 139.6 (EUR 140 million issued under Expected life of options (years) 10 3 November, EMTN) 4.00% May 2027 139.6 Share price at inception (EUR) 13.33 13.33 Eurobond 2027 (EUR 500 million) 0.875% 2027 496.8 December Fixed Term Loan (LuxGovSat) 3.30% 2027 115.0 Fair value per option/share (EUR) 1.31-1.58 10.53 December Fixed Term Loan (LuxGovSat) 3.30% 2027 114.6 German bond (EUR 50 million), November Total expected cost for each plan non-listed 4.00% 2032 49.8 (EUR million) 7.23 7.04 German bond (EUR 50 million), November non-listed 4.00% 2032 49.9 US Bond (USD 250 million) 5.30% April 2043 213.6 US Bond (USD 250 million) 5.30% April 2043 215.6 US Bond (USD 500 million) 5.30% March 2044 427.5 US Bond (USD 500 million) 5.30% March 2044 432.2 The expected life of options is based on historical data and is not Total non-current 3,908.5 necessarily indicative of exercise patterns that may occur. The Total non-current 3,737.2 expected volatility reflects the assumption that the historical volatil Current ity is indicative of future trends, which may or may not necessarily be Current EURIBOR Various in the actual outcome. EURIBOR Various in COFACE 6M + 1.70% 2019 41.2 COFACE 6M + 1.70% 2020 41.2 US Bond (USD 500 million) 2.50% March 2019 435.2 ANNUAL REPORT 2019 REPORT ANNUAL The total charge for the year for share-based compensation amounted Eurobond 2020 (EUR 650 million) 4.625% March 2020 649.9 Total current 476.4 Total current 691.1 SES to EUR 11.7 million (2018: EUR 14.7 million), out of which equity- settled EUR 9.6 million (2018: EUR 12.0 million) and cash-settled EUR 2.1 million (2018: EUR 2.7 million). 141 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
European Medium-Term Note Programme (‘EMTN’) EUR 500.0 million Eurobond (2026) 144A Bond USD 500.0 million (2044) SES has a EMTN Programme enabling SES, or SES Global Americas In 2018 SES issued a EUR 500.0 million 8-year bond under the In 2014 SES completed a 144A offering in the US market issuing USD Holdings GP, to issue as and when required notes up to a maximum Company’s European Medium-Term Note Programme. The bond bears 500.0 million 30-year bond with a coupon of 5.30% and a final matu aggregate amount of EUR 4,000.0 million. As at 31 December 2019, interest at a fixed rate of 1.625% and has a final maturity date on rity date of 25 March 2044. SES had issued EUR 2,440.0 million (2018: EUR 1,940.0 million) under 22 March 2026. the EMTN Programme with maturities ranging from 2020 to 2027. Syndicated loan 2021 EUR 500.0 million Eurobond (2027) In June 2019 the Company renewed its previous syndicated loan facil EUR 500.0 million Eurobond (2018) On 4 November 2019, SES issued a EUR 500.0 million bond under the ity (‘Syndicated loan 2015’). The updated facility is being provided by SES repaid its EUR 500.0 million bond on 24 October 2018 which was Company’s European Medium-Term Note Programme. The bond has 20 banks and has been structured as a 5 year multi-currency revolv issued under the Company’s European Medium-Term Note Pro an 8-year maturity and bears interest at a fixed rate of 0.875% and ing credit facility with an option to extend until 2026 (two one-year gramme and was bearing and interest at a fixed rate of 1.875%. has a final maturity date on 4 November 2027. extension options at the discretion of the lenders). The facility is for EUR 1,200.0 million and the interest payable is linked to a ratings grid. 144A Bond USD 500.0 million (2019) EUR 140.0 million Private Placement (2027) At the current SES credit rating of BBB- / Baa2, the interest rate is 45 SES repaid its USD 500.0 million 5-year bond with a coupon of 2.50%, In 2012 SES issued three individual tranches of a total EUR 140.0 mil basis points over EURIBOR/LIBOR. As at 31 December 2019 and 2018, on 25 March 2019. lion Private Placement under the Company’s European Medium-Term no amount has been drawn under this facility. Note Programme with ING Bank N.V. The Private Placement has a EUR 650.0 million Eurobond (2020) 15-year maturity, beginning 31 May 2012, and bears interest at a fixed EUR 522.9 million COFACE facility SES issued a EUR 650.0 million bond under the Company’s European rate of 4.00%. In 2009 SES signed a financing agreement with COFACE (Compagnie Medium-Term Note Programme in 2010. The bond has a 10-year matu Française d’Assurance pour le Commerce Extérieur) in respect of the rity and bears interest at a fixed rate of 4.625%. German bond issue of EUR 50.0 million (2032) investment in four geostationary satellites (ASTRA 2E, ASTRA 2F, In 2012 the Group signed an agreement to issue EUR 50.0 million in ASTRA 2G, ASTRA 5B). The facility is divided into five loans. The EUR 650.0 million Eurobond (2021) the German bond (‘Schuldschein’) market. The German bond bears drawings under the facility are based on invoices from the supplier of SES issued a EUR 650.0 million bond under the Company’s European a fixed interest rate of 4.00% and matures on 12 November 2032. the satellites. The first drawing was done on 23 April 2010 and all Medium-Term Note Programme in 2011. The bond has a 10-year matu loan tranches became fully drawn in November 2014. Each Coface rity and bears interest at a fixed rate of 4.75%. 144A Bond USD 750.0 million (2023) tranche is repayable in 17 equal semi-annual instalments where In 2013 SES completed a 144A offering in the US market issuing USD Coface A has a final maturity date of 1 August 2022, Coface F will German bond issue of EUR 400.0 million (2024 / 2025) 750.0 million 10-year bond with a coupon of 3.60% and a final matu mature on 21 May 2021 and Coface C and D will mature on 3 October In 2018 the Group closed the issuance of an aggregated amount of rity date on 4 April 2023. 2022. The entire facility bears interest at a floating rate of six-month EUR 400.0 million in the German bond (‘Schuldschein’) market. The EURIBOR plus a margin of 1.7%. In November 2017, SES opted to transaction consists of two individual tranches—a EUR 150.0 million 144A Bond USD 250.0 million (2043) execute voluntary prepayment clauses pursuant to the Agreement tranche with a floating interest rate of a six-month EURIBOR plus a In 2013 SES completed a 144A offering in the US market issuing USD and repaid the remaining outstanding amount of Coface tranche B as margin of 0.8% and a final maturity date on 18 June 2024 as well as a 250.0 million 30-year bond with a coupon of 5.30% and a final matu per 21 November 2017. All other Coface tranches remain in place as EUR 250.0 million tranche with a fixed interest rate of 1.71% and a final rity date on 4 April 2043. contracted. maturity date on 18 December 2025. ANNUAL REPORT 2019 REPORT ANNUAL SES 142 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
EUR 115.0 million Credit Facility (LuxGovSat) NOTE 24—PROVISIONS GROUP TAX PROVISION In 2015 LuxGovSat S.A. signed a financing agreement with BGL BNP Paribas for a EUR 115.0 million with a fixed rate coupon of 3.30%. The Provisions T97 Group tax provision mainly relates to Indian withholding taxes and facility is repayable in 14 semi-annual installments and has a final potential associated interest charges. The decrease of the Group tax maturity date of 1 December 2027. The first drawing was done on EUR MILLION 2019 2018 provision was mainly due to a reclassification from group tax provi 1 May 2016 and as of 31 December 2019 and 2018, total borrowings Non-current 14.0 16.8 sions to income tax payable in the US. The US Internal Revenue Ser of EUR 115.0 million were outstanding under the fixed term facility. Current 48.6 48.6 vice concluded the audit of 2015 and 2016. The main adjustment Total 62.6 65.4 related to Extraterritorial Income Exclusions (“ETI”). The full adjust Negotiable European Commercial Paper “NEU CP” ment had already been provided for in previous years and the liability (previous French Commercial paper programme) of EUR 4.9 million has now been reclassified to the income tax paya In 2005 SES put in place a EUR 500.0 million ‘NEU CP’ programme in Movements in each class of provision during the financial year are set ble account upon the conclusion of the audit. accordance with articles L.213-1 to L213-4 of the French Monetary out below: and Financial Code and article 6 of the order of 30 May 2016 and OTHER PROVISIONS subsequent amendments. The maximum outstanding amount of Movements in Each Class of Provisions T98 ‘NEU CP’ issuable under the programme is EUR 500.0 million or its Additions to ‘Other provisions’ during the year include restructuring Group tax Other counter value at the date of issue in any other authorised currency. EUR MILLION provision provisions Total expenses in connection with charges associated with the Group’s On 18 April 2019, this programme was extended for one further year. ongoing optimisation programme ›› see note 4. Other provisions used As at 1 January 2019 57.5 7.9 65.4 As at 31 December 2019 and 2018, no borrowings were outstanding during the year relate primarily to costs associated with these restruc under this programme. Additional provisions recognised 9.5 20.0 29.5 turing activities. Unused amounts reversed (3.9) (3.6) (7.5) European Commercial paper programme Used during the year (3.9) (13.2) (17.1) On the acquisition of O3b, a liability to its employees amounting to In 2012 SES signed the documentation for the inception of a joint Reclassification to income tax payable (8.2) (0.1) (8.3) EUR 15.9 million was recognised in respect of outstanding share- EUR 1,000.0 million guaranteed European commercial paper pro Impact of currency translation 0.6 - 0.6 based payment awards as at acquisition date. An amount of gramme of SES S.A. and SES Global Americas Holdings GP. The As at 31 December 2019 51.6 11.0 62.6 EUR 1.5 million (2018: EUR 3.2 million) was paid to O3b employees issuance under the programme represents senior unsecured obliga Non-current 11.2 2.8 14.0 during the year and an amount of EUR 1.4 million was reversed due tions of the issuer and any issuance under the programme is guaran Current 40.4 8.2 48.6 to forfeiture. As at 31 December 2019 the remaining liability is teed by the non-issuing entity. The programme is rated by Moody’s EUR 0.5 million (2018: EUR 3.4 million). Investors Services and is compliant with the standards set out in the As at 1 January 2018 40.1 13.8 53.9 STEP Market Convention. On 4 July 2017, this programme was Additional provisions recognised 24.3 2.7 27.0 updated and extended. As at 31 December 2019 and 2018, no borrow Unused amounts reversed (1.1) - (1.1) ings were outstanding under this programme. Used during the year (6.0) (8.9) (14.9) Impact of currency translation 0.2 0.3 0.5 As at 31 December 2018 57.5 7.9 65.4 Non-current 13.7 3.1 16.8
ANNUAL REPORT 2019 REPORT ANNUAL Current 43.8 4.8 48.6 SES 143 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 25—TRADE AND OTHER EMPLOYEE BENEFITS OBLIGATIONS NOTE 27—FIXED ASSETS SUPPLIERS PAYABLES In US operations, certain employees benefit from a post-retirement Fixed Assets Suppliers T101 Trade and Other Payables T99 health benefits programme which is externally insured. As at 31 December 2019, accrued premiums of EUR 16.5 million (2018: EUR MILLION 2019 2018 EUR MILLION 2019 2018 EUR 14.8 million) are included in this position. Non-current 622.5 200.9 Trade creditors 81.0 113.7 Current 134.8 130.8 Payments received in advance Contributions made in 2019 to Group pension schemes totalled (please also see note 26) 40.1 1.2 EUR 1.2 million (2018: EUR 1.1 million), which are recorded in the con Interest on borrowings 75.2 77.4 solidated income statement under ‘staff costs’. Fixed assets suppliers represent liabilities for assets being either Personnel-related liabilities 55.6 53.4 acquired directly through procurement contracts with asset manu Tax liabilities other than for income tax 63.8 65.3 In addition, certain employees of the US operations benefit from facturers, or in the framework of agreements whereby the asset is Other liabilities 35.5 56.5 defined contribution pension plans. A liability of EUR 11.6 million has being acquired by an intermediary but where in substance SES bears Total 351.2 367.5 been recognised as at 31 December 2019 (2018: EUR 10.0 million) in the risks and rewards of the procurement. this respect, out of which EUR 3.4 million is included under ‘Trade and other payables’ (2018: EUR 3.1 million). In the latter case the Company accrues for construction-related lia Tax liabilities mainly relate to VAT payables in the amount of bilities on the basis of pre-determined milestones agreed between EUR 59.3 million as of 31 December 2019 (2018: EUR 61.3 million). PAYMENTS RECEIVED IN ADVANCE the manufacturer and the relevant parties, see also ›› note 28. Non-cur rent fixed assets suppliers are initially recognized at fair value and NOTE 26—OTHER LONG-TERM In the framework of receivables securitisation transactions completed subsequently measured at amortised cost using the effective interest LIABILITIES in June 2017, June 2018 and June 2019 the Group received a net cash method. amount of EUR 61.0 million, EUR 88.3 million and EUR 59.1 million, Other Long-Term Liabilities T100 respectively, from a financial institution as advance settlement of future The two main procurements under this caption are: receivables arising until 2022 under contracts with a specific customer. EUR MILLION 2019 2018 • The mPower medium-Earth orbit constellation; Employee benefits obligations 24.7 24.3 A corresponding liability of EUR 156.5 million (2018: EUR 96.7 million), • The SES-17 satellite programme. Payments received in advance 118.1 96.7 representing SES’s obligation towards the financial institution to con Other long-term liabilities 25.4 12.9 tinue to provide services to the customer in accordance with the terms Acquisition of the SES mPower medium-Earth orbit Total 168.2 133.9 of the customer contract, is recorded in the Statement of Financial constellation—EUR 478.2 million (2018: EUR 174.1 million) Position as at 31 December 2019 under ‘Other long-term liabilities’ for On 11 September 2017, the Company, jointly with its subsidiary EUR 118.1 million (2018: EUR 96.7 million) and under ‘Trade and other O3b Networks Limited, entered as Procurement Agents into a Master payables’ for EUR 38.4 million. Procurement Agency and Option Agreement with a financial institu tion in connection with the procurement by that financial institution OTHER LONG-TERM LIABILITIES of seven medium-Earth orbit satellites from a satellite manufacturer. At the end of the satellite construction period, which is foreseen in ANNUAL REPORT 2019 REPORT ANNUAL The other long-term liabilities include customer collateral deposits 2021, the Group will have the right to acquire, or lease, the satellites
SES amounting to EUR 20.7 million and as well the liability towards Ciel from the financial institution or to direct their sale to a third-party. Satellite Limited Partnership ›› see note 21. 144 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Since the underlying Satellite Purchase and Sale Agreement is directly The capital expenditure commitments arising under these agree LITIGATION between the financial institution and the satellite manufacturer then ments as at 31 December are as follows: there is no contractual obligation on the side of the Procurement There were no significant litigation claims against the Group as at Agents during the satellite construction process. However, SES man Capital Expenditure Commitments T102 31 December 2019. agement takes the view that there is a constructive obligation arising over the procurement period and hence the Group is accruing for the EUR MILLION 2019 2018 GUARANTEES costs of this programme. SES has the right to nominate shortly before Within one year 265.0 471.7 the end of the construction period the entity within the Group which After one year but not more than five years 230.1 460.6 On 31 December 2019 the Group had outstanding bank guarantees will acquire or lease those assets. SES management expects that the After more than five years 59.5 65.2 for an amount of EUR 101.3 million (2018: EUR 118.5 million) with satellites will be acquired or leased in due course by the company Total 554.6 997.5 respect to performance and warranty guarantees for services of SES mPower S.à r.l. in Luxembourg. satellite operations.
Acquisition of the SES-17 satellite—EUR 178.4 million NOTE 29—LEASES (2018: EUR 34.2 million) OTHER COMMITMENTS The liability towards the manufacturer of the SES-17 satellite, which 1) Lessor is scheduled for launch in 2021, is stated at the higher of the mile The Group’s other commitments mainly comprise transponder service During 2019 the Group recognised leasing income of EUR 43.0 mil stone invoices outstanding or the amount payable to the manufac agreements for the purchase of satellite capacity from third parties lion (2018: EUR 76.8 million) related to two lease contracts. One turer in the case of a termination for convenience of the programme under contracts with a maximum life of eight years, as well as of the lease contracts matured on 27 January 2019. The other by the Company. EUR 70.0 million capital contribution into a Luxembourg space sector lease contract matures on 30 November 2021 and the related fund in connection with the renewal of the agreement with Luxem annual lease payment will amount to EUR 23.2 million in 2020 and NOTE 28—COMMITMENTS AND bourg government in respect of SES’s concession to operate satellites EUR 21.3 million in 2021. The related carrying amount of property, CONTINGENCIES under Luxembourg’s jurisdiction. plant and equipment leased as at 31 December 2019 amounts to EUR 122.2 million (31 December 2018: EUR 178.8 million). CAPITAL EXPENDITURE COMMITMENTS Other Commitments T103 2) Lessee The Group had outstanding commitments in respect of contracted EUR MILLION 2019 2018 The adoption of IFRS 16 has resulted in changes in accounting capital expenditure totalling EUR 554.6 million as at 31 December 2019 Within one year 82.5 99.7 policies and adjustments to the opening balances as of 1 Janu (2018: EUR 997.5 million). These commitments largely reflect the pro After one year but not more than five years 50.2 100.8 ary 2018 in the consolidated statement of financial position. The curement of satellites and satellite launchers and are stated net of After more than five years 65.5 5.0 Group has applied the simplified transition approach as allowed liabilities under these programmes which are already disclosed under Total 198.2 205.5 by the standard. The amount of right-of-use assets and lease “Fixed assets suppliers”, ›› see Note 27. The commitments as at liabilities recorded as an adjustment to the opening balance 31 December 2019 also include EUR 87.0 million in connection with sheet of 2018 was EUR 46.8 million. the renewal of the agreement with Luxembourg government in The total expense recognised for transponder service agreements in respect of SES’ concession to operate satellites under Luxembourg’s 2019 was EUR 77.2 million (2018: EUR 92.3 million). Specifically, the Group has recognised right-of-use assets, and jurisdiction, as disclosed in ›› Note 14—“Intangib|e assets”. associated liabilities, in relation to contracts previously classified ANNUAL REPORT 2019 REPORT ANNUAL as “operating leases” under the provision of IAS 17. These assets
SES and liabilities were measured at the present value of the remain 145 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
ing lease payments, discounted using the Group’s weighted aver There were no material additions to the right-of-use assets during ii) Amounts recognised in the consolidated income age incremental borrowing rate of 3.62% as at 31 December 2019 2019, depreciation charge for the year was EUR 11.9 million (2018: statement (3.66% as at 31 December 2018). The difference between the oper EUR 9.8 million). Depreciation charge of right-of-use assets: ating lease commitments and the right-of-use assets recognised represents impact of discounting over the outstanding lease term. Lease liabilities are presented below as at 31 December: Depreciation Charge of Right-of-Use Assets T107
EUR MILLION 2019 2018 i) Amounts recognised in the consolidated statement of Lease Liabilities T106 financial position Buildings 8.3 6.4 The Group leases office buildings, ground segment assets and EUR MILLION 2019 2018 Ground segment 2.5 2.4 other fixtures and fittings, tools and equipment, information Maturity analysis—contractual undiscounted Other fixtures and fittings, tools and equipment 1.1 0.9 cash flows about which is presented below. Total 11.9 9.7 Within one year 12.4 10.2 Group leases of Offices, Ground Segment, After one year but not more than five years 29.1 25.7 Assets and other Fixtures, Tools and Equipment, More than five years 6.2 5.3 Finance cost: Information 2019 T104 Total 47.7 41.2 Finance Cost T108 Other fix- Lease liabilities included in the statement of tures and EUR MILLION 2019 2018 fittings, financial position at 31 December Ground tools and 31 Decem- Current 11.2 9.5 Interest expense 0.9 0.7 EUR MILLION Buildings segment equipment ber 2019 Non-current 29.7 28.6 Total 0.9 0.7 Right-of-use assets Total 40.9 38.1 Cost 44.0 8.5 3.6 56.1 Accumulated The total cash outflow for leases in 2019 was EUR 13.4 million (2018: depreciation (12.1) (3.6) (1.2) (16.9) The leases of office buildings typically run for a period of 2-10 years EUR 9.5 million). Total 31.9 4.9 2.4 39.2 and leases of ground segment assets for 5 years. Some leases include an option to renew the lease for an additional period of time after the end of the contract term. The Group assesses at lease commence Group leases of Offices, Ground Segment, ment whether it is reasonably certain to exercise the extension option. Assets and other Fixtures, Tools and Equipment, The Group reassesses whether it is reasonably certain to exercise the Information 2018 T105 options if there is a significant event or significant change in circum Other fix- stances within its control. tures and fittings, Ground tools and 31 Decem- EUR MILLION Buildings segment equipment ber 2018 Right-of-use assets ANNUAL REPORT 2019 REPORT ANNUAL Cost 37.3 8.2 2.1 47.6 SES Accumulated depreciation (6.5) (2.5) (0.9) (9.9) Total 30.8 5.7 1.2 37.7 146 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 30—CASH FLOW INFORMATION Movements in Net Debt for 2019 and 2018 T110 EUR 150.0 million (2018: EUR 100.0 million). These have been pre sented net in the consolidated statement of cash flows. Borrow- Borrow- NON-CASH INVESTING ACTIVITIES ings— ings— Cash and repayable repayable NOTE 31—RELATED PARTIES Purchases of property, plant and equipment or intangible assets not cash within one after one EUR MILLION equivalents year year Total included as a cash outflow in the consolidated statement of cash flows The state of Luxembourg holds a direct 11.58% voting interest in the are disclosed in ›› notes 12, 13 and 14. Net debt as at Company and two indirect interests, both of 10.88%, through two state 31 December 2018 909.1 (476.4) (3,908.5) (3,475.8) owned banks, Banque et Caisse d’Epargne de l’Etat and Société Cash flows (net) 248.9 483.6 (496.7) 235.8 NET DEBT RECONCILIATION Nationale de Crédit et d’Investissement. These shares constitute the Foreign exchange adjustments (2.7) 0.0 (25.7) (28.4) Company’s Class B shares, as described in ›› note 20. This section sets out an analysis of net debt and the movements in Transfers - (691.2) 691.2 - net debt for 2019 and 2018. The total payments to directors for attendance at board and committee Other non-cash movements1 - (7.1) 2.5 (4.6) meetings in 2019 amounted to EUR 1.2 million (2018: EUR 1.3 million). Net debt 2018 and 2019 T109 Net debt as at These payments are computed on a fixed and variable basis, the variable 31 December 2019 1,155.3 (691.1) (3,737.2) (3,273.0) part being based upon attendance at board and committee meetings. EUR MILLION 2019 2018 1 related to loan origination costs Cash and cash equivalents 1,155.3 909.1 The key management of the Group, defined as the Group’s Executive Borrowings—repayable within one year (691.1) (476.4) Committee, received compensation as follows:
Borrowings—repayable after one year (3,737.2) (3,908.5) Net debt (3,273.0) (3,475.8) Borrow- Borrow- Group Management Compensation T111 ings— ings— Cash and repayable repayable EUR MILLION 2019 2018 cash within one after one EUR MILLION equivalents year year Total Remuneration including bonuses and other benefits 8.0 8.3 EUR MILLION 2019 2018 Net debt as at 31 December 2017 269.6 (534.1) (3,413.8) (3,678.3) Pension benefits 0.9 0.6 Cash and cash equivalents 1,155.3 909.1 Cash flows (net) 640.3 541.7 (893.0) 289.0 Share-based compensation plans 1.9 1.8 Borrowings—floating rates (270.0) (310.2) Foreign exchange Total 10.8 10.7 Borrowings—fixed interest rates (4,158.3) (4,074.7) adjustments (0.8) (30.9) (48.2) (79.9) Net debt (3,273.0) (3,475.8) Transfers - (447.0) 447.0 - Other non-cash The total outstanding amount in respect of share-based payment 1 movements - (6.1) (0.5) (6.6) instruments allocated to key management as at 31 December 2019 Net debt as at were 3,567,545 (2018: 3,714,589). 31 December 2018 909.1 (476.4) (3,908.5) (3,475.8)
1 related to loan origination costs In 2019, SES and the Luxembourg government reached an agreement to renew SES’s concession to operate satellites operating under Lux ANNUAL REPORT 2019 REPORT ANNUAL During 2019 the Group issued European Commercial Paper for embourg’s jurisdiction, as disclosed in ›› note 14—“Intangible assets”
SES EUR 150.0 million (2018: EUR 100.0 million) and reimbursed and ›› note 28—“Commitments and contingencies”. 147 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 32—POST-BALANCE SHEET the lower portion of the C-band on an accelerated timeline in EVENTS exchange for accelerated relocation payments which could total up to USD 9.7 billion, with an amount being apportioned to SES as C-BAND SPECTRUM TO REPURPOSE will be set out in the Order to released shortly, and would be paid by winning bidders in the C-band auction. At its Open Commission Meeting on Friday 28 February 2020, the • It sets out the following timeline for eligible satellite operators Federal Communications Commission (‘FCC’) adopted a Report and seeking to qualify for accelerated relocation payments as will be Order of Proposed Modification (‘Order’) in connection with the repur set out in Order to released shortly: posing of 300 MHz of C-band spectrum to support the rapid deploy − submissions for Accelerated Relocation Elections by Q2 2020; ment of terrestrial 5G services in the contiguous United States. − clearing 100 MHz for terrestrial operations in 46 of the nation’s top 50 Partial Economic Areas by 5 December 2021; The C-band downlink is a 500 MHz segment of spectrum from 3.7 to − clearing the entire 280 MHz for terrestrial operations in the con 4.2 GHz, which is currently mainly used by satellite operators, includ tiguous United States by 5 December 2023. ing SES, to distribute video and audio content to broadcasters, cable operators, and other content distributors. To vacate the lower 300 The Company in principle supports the FCC’s objectives and will fully MHz of the C-band within the accelerated time frame set by the FCC, cooperate with the FCC to implement the clearing process and awaits the satellite operators will need to procure and bring into use new the release of the full Order in order to fully evaluate the impact on satellite capacity and re-equip ground segment infrastructure, includ its operations and on its consolidated financial statements. ing at customer sites. The main elements of this Order pertaining to the Company are as follows: POTENTIAL SEPARATION OF SES VIDEO AND SES NETWORKS • It requires the satellite operators to clear the lower 280 megahertz of the C-band (3.7-3.98 GHz) in the contiguous United States At its meeting on 25 February 2020, the Board approved the inves and make it available for flexible use, including 5G, via a public tigation by Management of the creation of two ‘pure-play’ market auction, with the remaining 20 megahertz serving as a guard band verticals through the potential separation of its Networks business (3.98-4 GHz). within SES in order to drive strategic and operational focus, provide • It requires satellite operators to ‘repack’ their transmissions into increased external visibility and to appropriately configure SES’ overall the upper 200 MHz of the band (4.0-4.2 GHz). business for the future. • It foresees the holding of a public auction of licenses in the 3.7–3.98 GHz band with bidding for these licenses to commence on Consideration will include an analysis of a separate capital structure 8 December 2020. The auction would offer fourteen 20-megahertz for the Networks business, potentially providing it with access to blocks of spectrum. external capital to accelerate growth and build on the unique value • It proposes that all reasonable relocation costs of eligible C-band proposition that has been established in the market. users, inclusing SES, would be reimbursed by the winning bidders in the C-band auction. There were no other material events occurring between the reporting ANNUAL REPORT 2019 REPORT ANNUAL • It establishes a deadline of 5 December 2025 for this clearing date and the date when the consolidated financial statements were
SES process and gives satellite operators the opportunity to clear authorised by the Board of Directors. 148 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 33—CONSOLIDATED SUBSIDIARIES, ASSOCIATES Group’s Subsidiaries and Associates T112 Economic Economic Method of Method of The consolidated financial statements include the financial state interest interest (%) consolida- consolida- ments of the Group’s subsidiaries and associates listed below: (%) 2019 2018 tion 2019 tion 2018 SES Media Solutions GmbH, Germany 100 100 Full Full Group’s Subsidiaries and Associates T112 MX1 (Thailand) Ltd, Thailand 100 100 Full Full PT MX1 Smartcast Indonesia, Indonesia 100 100 Full Full Economic Economic Method of Method of interest interest (%) consolida- consolida- ASTRA Deutschland GmbH, Germany 100 100 Full Full (%) 2019 2018 tion 2019 tion 2018 SES ASTRA Iberica S.A., Spain 100 100 Full Full SES ASTRA S.A., Luxembourg 100 100 Full Full ASTRA France S.A., France 100 100 Full Full SES GLOBAL-Americas Inc., U.S.A. 100 100 Full Full ASTRA (GB) Limited, United Kingdom 100 100 Full Full SES GLOBAL Americas Holdings General Partnership, U.S.A. 100 100 Full Full ASTRA CEE Sp. z o.o, Poland 100 100 Full Full SES Participations S.A., Luxembourg 100 100 Full Full SES ASTRA (Romania) S.r.l., Romania 100 100 Full Full SES Finance S.à r.l., Luxembourg 100 100 Full Full SES Satellites Ghana Ltd, Ghana 100 100 Full Full SES Holdings (Netherlands) B.V., Netherlands 100 100 Full Full SES ENGINEERING (Luxembourg) S.à r.l., Luxembourg 100 100 Full Full SES ASTRA Services Europe S.A., Luxembourg 100 100 Full Full SES ASTRA AB, Sweden 100 100 Full Full SES Latin America S.A., Luxembourg 100 100 Full Full Sirius Satellite Services SIA, Latvia 100 100 Full Full SES Belgium S.p.r.l, Belgium 100 100 Full Full SES SIRIUS Ukraine, Ukraine 100 100 Full Full SES Insurance International S.A., Luxembourg 100 100 Full Full SES ASTRA 1KR S.à r.l., Luxembourg 100 100 Full Full SES Insurance International Re S.A., Luxembourg 100 100 Full Full SES ASTRA 1L S.à r.l., Luxembourg 100 100 Full Full SES Lux Finance S.à r.l., Luxembourg2 - 100 Full Full SES ASTRA 1M S.à r.l., Luxembourg 100 100 Full Full SES Networks Lux S.à r.l., Luxembourg 100 100 Full Full SES ASTRA 3B S.à r.l., Luxembourg 100 100 Full Full Ciel Satellite Holdings Inc., Canada 100 100 Full Full SES ASTRA 5B S.à r.l., Luxembourg 100 100 Full Full Ciel Satellite Limited Partnership, Canada 100 100 Full Full SES ASTRA 1N S.à r.l., Luxembourg 100 100 Full Full Northern Americas Satellite Ventures, Inc., Canada 100 100 Full Full SES ASTRA 2E S.à r.l., Luxembourg 100 100 Full Full SES TechCom S.A., Luxembourg 100 100 Full Full SES ASTRA 2F S.à r.l., Luxembourg 100 100 Full Full SES-15 S.à r.l., Luxembourg 100 100 Full Full SES ASTRA 2G S.à r.l., Luxembourg 100 100 Full Full SES Digital Distribution Services AG, Switzerland2 - 100 Full Full SES-10 S.à r.l., Luxembourg 100 100 Full Full Redu Operations Services S.A., Belgium 48 48 Equity Equity LuxGovSat S.A., Luxembourg 50 50 Full Full Redu Space Services S.A., Belgium 52 52 Full Full SES Satellite Leasing Ltd, Isle of Man 100 100 Full Full HD Plus GmbH, Germany 100 100 Full Full Al Maisan Satellite Communications Company LLC, UAE 35 35 Full Full SES ASTRA Real Estate (Betzdorf) S.A., Luxembourg 100 100 Full Full Satellites Ventures (Bermuda), Ltd, Bermuda 50 50 Full Full
ANNUAL REPORT 2019 REPORT ANNUAL MX1 GmbH, Germany 100 100 Full Full SES ASTRA Africa (Proprietary) Ltd, South Africa 100 100 Full Full
SES 2 Entity sold, merged, liquidated or in the process of liquidation in 2019 149 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Group’s Subsidiaries and Associates T112 Group’s Subsidiaries and Associates T112
Economic Economic Method of Method of Economic Economic Method of Method of interest interest (%) consolida- consolida- interest interest (%) consolida- consolida- (%) 2019 2018 tion 2019 tion 2018 (%) 2019 2018 tion 2019 tion 2018 SES AMERICOM, Inc., U.S.A. 100 100 Full Full Satelites Globales S. de R.L. de C.V., Mexico 100 100 Full Full SES Telecomunicacoes do Brasil Ltda, Brazil 100 100 Full Full SES Satelites Directo Ltda, Brazil 100 100 Full Full SES Government Solutions, Inc., U.S.A. 100 100 Full Full SES DTH do Brasil Ltda, Brazil 100 100 Full Full Sistemas Satelitales de Mexico S. de R.L. de C.V., Mexico 100 100 Full Full SES Global South America Holding S.L., Spain 100 100 Full Full SES Telecommunicaciones de Mexico S. de R.L. de C.V., Mexico 100 100 Full Full New Skies Satellites B.V., The Netherlands 100 100 Full Full SES Satellites International, Inc., U.S.A. 100 100 Full Full New Skies Satellites, Inc., U.S.A. 100 100 Full Full SES Satellites (Gibraltar) Ltd, Gibraltar 100 100 Full Full New Skies Satellites Mar B.V., The Netherlands 100 100 Full Full AMC-1 Holdings LLC, U.S.A. 100 100 Full Full New Skies Satellites Ltda, Brazil 100 100 Full Full AMC-2 Holdings LLC, U.S.A. 100 100 Full Full SES ENGINEERING (Netherlands) B.V., The Netherlands 100 100 Full Full AMC-3 Holdings LLC, U.S.A. 100 100 Full Full SES NEW SKIES Marketing B.V., The Netherlands 100 100 Full Full SES-9 Holdings LLC, U.S.A. 100 100 Full Full New Skies Satellites Argentina B.V., The Netherlands 100 100 Full Full AMC-6 Holdings LLC, U.S.A. 100 100 Full Full New Skies Satellites Australia Pty Ltd, Australia 100 100 Full Full AMC-8 Holdings LLC, U.S.A. 100 100 Full Full New Skies Satellites Licensee B.V., The Netherlands 100 100 Full Full AMC-9 Holdings LLC, U.S.A. 100 100 Full Full SES Asia S.A., Luxembourg 100 100 Full Full AMC-10 Holdings LLC, U.S.A. 100 100 Full Full SES Finance Services AG, Switzerland 100 100 Full Full AMC-11 Holdings LLC, U.S.A. 100 100 Full Full SES World Skies Singapore Pte Ltd, Singapore 100 100 Full Full SES AMERICOM (Asia 1A) LLC, U.S.A. 100 100 Full Full O3b Networks Ltd, Jersey, Channel Islands 100 100 Full Full AMERICOM Asia Pacific LLC, U.S.A. 100 100 Full Full O3b Ltd, Jersey, Channel Islands 100 100 Full Full AMC-12 Holdings LLC, U.S.A. 100 100 Full Full O3b Africa Ltd, Mauritius2 100 100 Full Full AMC-4 Holdings LLC, U.S.A. 100 100 Full Full O3b Networks Management Services B.V., The Netherlands 100 100 Full Full AMC-7 Holdings LLC, the US 100 100 Full Full O3b Sales B.V., The Netherlands 100 100 Full Full AMC-15 Holdings LLC, U.S.A. 100 100 Full Full O3b Holdings 1 B.V., The Netherlands 100 100 Full Full AMC-16 Holdings LLC, U.S.A. 100 100 Full Full O3b Holdings 2 B.V., The Netherlands 100 100 Full Full SES-1 Holdings, LLC, U.S.A. 100 100 Full Full O3b Coöperatief UA, The Netherlands 100 100 Full Full QuetzSat Directo, S. de R.L. de C.V., Mexico 100 100 Full Full O3b Networks USA, LLC, U.S.A. 100 100 Full Full SES ENGINEERING (US) Inc., U.S.A. 100 100 Full Full O3b USA, LLC, U.S.A. 100 100 Full Full AOS Inc., the US 100 100 Full Full O3b America, LLC, U.S.A. 100 100 Full Full SES-2 Holdings LLC, U.S.A. 100 100 Full Full O3b (Singapore) Pte Limited, Singapore2 100 100 Full Full SES-3 Holdings LLC, U.S.A. 100 100 Full Full O3b Teleport Services (Australia) Pty Limited, Australia 100 100 Full Full ANNUAL REPORT 2019 REPORT ANNUAL QuetzSat S. de R.L. de C.V., Mexico 100 100 Full Full O3b Teleport Serviços (Brasil) Ltda, Brasil 100 100 Full Full
SES 2 Entity sold, merged, liquidated or in the process of liquidation in 2019 150 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Group’s Subsidiaries and Associates T112
Economic Economic Method of Method of interest interest (%) consolida- consolida- (%) 2019 2018 tion 2019 tion 2018 O3b Networks (Brasil) Ltda, Brasil 100 100 Full Full O3b Services (Portugal) Ltda, Portugal 100 100 Full Full O3b Teleport Services (Peru) SAC, Peru 100 100 Full Full SES mPOWER S.à r.l., Luxembourg 100 100 Full Full SES Networks Satellites S.à r.l., Luxembourg 100 100 Full Full West Africa Platform Services Ltd, Ghana 51 51 Full Full MX1 Ltd, Israel 100 100 Full Full MX1 Inc., U.S.A. 100 100 Full Full G.S.N GoSat Distribution Network Ltd, Cyprus 100 100 Full Full EMP Media Port Ltd, Cyprus 100 100 Full Full MX1 C.E.E. S.A., Romania 100 80 Full Full MX1 Limited, United Kingdom2 100 100 Full Full World Satellite Distribution S.A., Luxembourg2 - 100 Full Full Sofia Teleport EOOD, Bulgaria2 - 100 Full Full MX1 Korea Ltd., Korea 51 51 Full Full London Broadcasting Center Ltd., United Kingdom2 - 100 Full Full SES-17 S.à r.l., Luxembourg 100 100 Full Full SES Defence UK Ltd, United Kingdom 100 100 Full Full SES Techcom Afrique S.A. S.U., Burkina Faso 100 100 Full Full SES Satellite Nigeria Limited, Nigeria 100 100 Full Full SES-11 Holdings, LLC, U.S.A. 100 100 Full Full SES Networks GmbH, Germany 100 100 Full Full SES Satellites India Private Limited1 100 - Full -
1 Entity created in 2019 2 Entity sold, merged, liquidated or in the process of liquidation in 2019 ANNUAL REPORT 2019 REPORT ANNUAL SES 151 152 SES ANNUAL REPORT 2019 COMPANY OUR 1 REPORT AND STRATEGIC OPERATIONAL 2 STATEMENTS FINANCIAL CONSOLIDATED 3
159 158 157 156 153 ACCOUNTS ANNUAL SES S.A. 4 ACCOUNTS SES S.A.ANNUAL 4 Notes toNotes theannualaccounts Statement inshareholders’ ofchanges equity Profit account andloss sheet Balance Audit report INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Secteur Financier’ (CSSF). Our responsibilities under the EU Regula Management’s assessment of the recoverable amount of investments AUDIT REPORT tion No 537 / 2014, the Law of 23 July 2016 and ISAs as adopted for in subsidiaries requires significant judgement in the determination of Luxembourg by the CSSF are further described in the ‘Responsibi the level at which the investments in affiliated undertakings are tested lities of the ‘Réviseur d’entreprises agréé’ for the audit of the annual for impairment taking into account the substance of the business To the Shareholders of SES S.A. accounts’ section of our report. activity, interdependency of the cash flows between the different sub sidiaries and their level of integration. REPORT ON THE AUDIT OF THE We believe that the audit evidence we have obtained is sufficient and ANNUAL ACCOUNTS appropriate to provide a basis for our opinion. Moreover, the determination of the recoverable value requires signif icant estimates as it relates to the estimation of the forecasted cash OUR OPINION We are independent of the Company in accordance with the Inter flows and of the discount rates and long-term growth rates. national Ethics Standards Board for Accountants’ Code of Ethics for In our opinion, the accompanying annual accounts give a true and fair Professional Accountants (IESBA Code) as adopted for Luxembourg We focused on this area due to the inherent complexity and judge view of the financial position of SES S.A. (the ‘Company’) as at by the CSSF together with the ethical requirements that are relevant ment in the estimate for the recoverable amount of the investments 31 December 2019, and of the results of its operations for the year to our audit of the annual accounts. We have fulfilled our other ethical in affiliated undertakings and the materiality of the balance. then ended in accordance with Luxembourg legal and regulatory responsibilities under those ethical requirements. requirements relating to the preparation and presentation of the How our audit addressed the Key audit matter annual accounts. To the best of our knowledge and belief, we declare that we have not • We obtained an understanding of Management’s process and con provided non-audit services that are prohibited under Article 5(1) of trols related to the identification of the impairment indicators and Our opinion is consistent with our additional report to the Audit and the EU Regulation No 537 / 2014. the impairment test of the investments in affiliated undertakings; Risk Committee. • We evaluated Management’s methodology used to estimate the The non-audit services that we have provided to the Company and recoverable amount of the investments in affiliated undertakings, What we have audited its controlled undertakings, if applicable, for the year then ended, are including the grouping of certain investments in order to appro The Company’s annual accounts comprise: disclosed in ›› note 19 to the annual accounts. priately reflect the substance of the activity, interdependency of cash flows and the level of integration of their operations; • the balance sheet as at 31 December 2019; KEY AUDIT MATTERS • We agreed the forecasted cash flows used for the determination • the profit and loss account for the year then ended; of the recoverable value to the 2020 Business Plan as approved by • the statement of changes in shareholders’ equity; and Key audit matters are those matters that, in our professional judg the Board of Directors and challenged the different assumptions • the notes to the annual accounts, which include a summary of ment, were of most significance in our audit of the annual accounts based on our expectations in terms of significant developments significant accounting policies. of the current period. These matters were addressed in the context of during the forecast period and evaluated whether these were our audit of the annual accounts as a whole, and in forming our opinion appropriately reflected in the cash flows; BASIS FOR OPINION thereon, and we do not provide a separate opinion on these matters. • We involved valuation specialists and independently recalculated the weighted average cost of capital based on the use of market date and We conducted our audit in accordance with the EU Regulation Valuation of the shares in affiliated undertakings challenged the long-term growth rate applied based on market data; No 537 / 2014, the Law of 23 July 2016 on the audit profession (Law The Company has investments in shares in affiliated undertakings of • We considered the appropriateness of the disclosures in ›› note 3 of 23 July 2016) and with International Standards on Auditing (ISAs) EUR 7,656.4 million as at 31 December 2019. to the annual accounts. ANNUAL REPORT 2019 REPORT ANNUAL as adopted for Luxembourg by the ‘Commission de Surveillance du SES 153 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
OTHER INFORMATION Those charged with governance are responsible for overseeing the • evaluate the appropriateness of accounting policies used and the Company’s financial reporting process. reasonableness of accounting estimates and related disclosures The Board of Directors is responsible for the other information. The made by the Board of Directors; other information comprises the information stated in the manage RESPONSIBILITIES OF THE ‘RÉVISEUR • conclude on the appropriateness of the Board of Directors’ use of ment report and the Corporate Governance Statement but does not D’ENTREPRISES AGRÉÉ’ FOR THE AUDIT the going concern basis of accounting and, based on the audit evi include the annual accounts and our audit report thereon. OF THE ANNUAL ACCOUNTS dence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Com Our opinion on the annual accounts does not cover the other informa The objectives of our audit are to obtain reasonable assurance about pany’s ability to continue as a going concern. If we conclude that tion and we do not express any form of assurance conclusion thereon. whether the annual accounts as a whole are free from material mis a material uncertainty exists, we are required to draw attention in statement, whether due to fraud or error, and to issue an audit report our audit report to the related disclosures in the annual accounts In connection with our audit of the annual accounts, our responsibility that includes our opinion. Reasonable assurance is a high level of or, if such disclosures are inadequate, to modify our opinion. Our is to read the other information identified above and, in doing so, con assurance, but is not a guarantee that an audit conducted in accord conclusions are based on the audit evidence obtained up to the sider whether the other information is materially inconsistent with the ance with the EU Regulation No 537 / 2014, the Law of 23 July 2016 date of our audit report. However, future events or conditions may annual accounts or our knowledge obtained in the audit, or otherwise and with ISAs as adopted for Luxembourg by the CSSF will always cause the Company to cease to continue as a going concern; appears to be materially misstated. If, based on the work we have per detect a material misstatement when it exists. Misstatements can • evaluate the overall presentation, structure and content of the formed, we conclude that there is a material misstatement of this other arise from fraud or error and are considered material if, individually or annual accounts, including the disclosures, and whether the annual information, we are required to report that fact. We have nothing to in the aggregate, they could reasonably be expected to influence the accounts represent the underlying transactions and events in a report in this regard. economic decisions of users taken on the basis of these annual manner that achieves fair presentation. accounts. RESPONSIBILITIES OF THE BOARD OF We communicate with those charged with governance regarding, DIRECTORS AND THOSE CHARGED WITH As part of an audit in accordance with the EU Regulation No 537 / 2014, among other matters, the planned scope and timing of the audit and GOVERNANCE FOR THE ANNUAL ACCOUNTS the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by significant audit findings, including any significant deficiencies in the CSSF, we exercise professional judgment and maintain profes internal control that we identify during our audit. The Board of Directors is responsible for the preparation and fair pres sional scepticism throughout the audit. We also: entation of the annual accounts in accordance with Luxembourg legal We also provide those charged with governance with a statement that and regulatory requirements relating to the preparation and presenta • identify and assess the risks of material misstatement of the annual we have complied with relevant ethical requirements regarding inde tion of the annual accounts, and for such internal control as the Board accounts, whether due to fraud or error, design and perform audit pendence, and communicate to them all relationships and other mat of Directors determines is necessary to enable the preparation of procedures responsive to those risks, and obtain audit evidence ters that may reasonably be thought to bear on our independence, annual accounts that are free from material misstatement, whether that is sufficient and appropriate to provide a basis for our opinion. and where applicable, related safeguards. due to fraud or error. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may From the matters communicated with those charged with governance, In preparing the annual accounts, the Board of Directors is responsi involve collusion, forgery, intentional omissions, misrepresenta we determine those matters that were of most significance in the audit ble for assessing the Company’s ability to continue as a going con tions, or the override of internal control; of the annual accounts of the current period and are therefore the cern, disclosing, as applicable, matters related to going concern and • obtain an understanding of internal control relevant to the audit in key audit matters. We describe these matters in our audit report using the going concern basis of accounting unless the Board of order to design audit procedures that are appropriate in the cir unless law or regulation precludes public disclosure about the matter. ANNUAL REPORT 2019 REPORT ANNUAL Directors either intends to liquidate the Company or to cease opera cumstances, but not for the purpose of expressing an opinion on
SES tions, or has no realistic alternative but to do so. the effectiveness of the Company’s internal control; 154 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
The management report is consistent with the annual accounts and has been prepared in accordance with applicable legal requirements.
The Corporate Governance Statement is included in the management report. The information required by Article 68ter Paragraph (1) Letters c) and d) of the Law of 19 December 2002 on the commercial and com panies register and on the accounting records and annual accounts of undertakings, as amended, is consistent with the annual accounts and has been prepared in accordance with applicable legal requirements.
We have been appointed as ‘Réviseur d’Entreprises Agréé’ of the Com pany by the General Meeting of the Shareholders on 4 April 2019 and the duration of our uninterrupted engagement, including previous renewals and reappointments, is 7 years.
PricewaterhouseCoopers, Société coopérative
Luxembourg, 29 February 2020
Represented by Gilles Vanderweyen ANNUAL REPORT 2019 REPORT ANNUAL SES 155 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
BALANCE SHEET EUR MILLION Note 2019 2018 Liabilities As at 31 December 2019 Capital and reserves Subscribed capital 6 719.0 719.0 Share premium account 6 1,890.2 1,890.2 Reserves Balance Sheet T113 Legal reserve 7 71.9 70.0 EUR MILLION Note 2019 2018 Reserve for own shares 8 58.9 93.4 Assets Profit brought forward 2,121.5 1,284.7 Fixed Assets Profit for the financial year 509.8 1,172.3 Intangible assets 0.8 1.6 5,371.3 5,229.6 Financial assets Creditors Shares in affiliated undertakings 3 7,656.4 8,056.4 Debenture loans—Non convertible loans 9 Loans to affiliated undertakings 3 3,489.7 2,275.6 becoming due and payable within one year 788.1 576.3 11,146.9 10,333.6 becoming due and payable after more than one year 4,875.2 5,000.0 Current Assets Amounts owed to credit institutions 9 Debtors becoming due and payable within one year 41.2 42.0 Amounts owed by affiliated undertakings becoming due and payable after more than one year 80.9 122.1 becoming due and payable within one year 4 1,146.6 2,323.0 Trade creditors becoming due and payable after one year 4 478.2 174.1 becoming due and payable within one year 1.5 0.7 Other debtors Amounts owed to affiliated undertakings 9 becoming due and payable within one year 0.7 4.3 becoming due and payable within one year 1,651.9 2,569.8 Investments becoming due and payable after more than one year 611.7 68.0 Own shares 5 58.9 93.4 Other creditors Cash at bank and cash in hand 1,021.4 825.2 Tax authorities 10 1.2 11.5 2,705.8 3,420.0 Social security authorities 0.4 0.3 Prepayments Other creditors becoming due and payable within one year 9.1 10.7 becoming due and payable within one year 4.3 8.0 becoming due and payable after more than one year 44.1 38.1 payable after more than one year 11 478.2 174.1 8,534.6 8,572.8 Total assets 13,905.9 13,802.4 Total liabilities 13,905.9 13,802.4 ANNUAL REPORT 2019 REPORT ANNUAL
SES The accompanying notes form an integral part of the annual accounts. The accompanying notes form an integral part of the annual accounts. 156 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2019
Profit and Loss Account T114 Profit and Loss Account T114
EUR MILLION Note 2019 2018 EUR MILLION Note 2019 2018 Profit and loss account Other operating income 12 24.2 16.8 Interest payable and similar expenses concerning affiliated undertakings 18 (45.3) (35.2) Raw material and consumables and other external expenses other interest and similar expenses 18 (236.8) (254.6) Other external expenses (27.4) (25.4) Tax on profit or loss 64.9 59.3 Staff costs 13 Taxes other (0.9) (1.5) Wages and salaries (10.4) (18.7) Social security costs Profit or loss for the financial year 509.8 1,172.3 relating to pensions (1.4) (1.1) other social security costs (0.6) (0.4) The accompanying notes form an integral part of the annual accounts. Other staff costs (0.1) (0.1)
Other operating expenses (11.5) (8.5)
Income from participating interest concerning affiliated undertakings 14 652.7 1,354.7
Income from other investments and loans forming part of fixed assets concerning affiliated undertakings 15 66.9 19.1
Other interest receivable and similar income concerning affiliated undertakings 16 55.8 51.8 other interest and similar income 16 2.2 10.4 ANNUAL REPORT 2019 REPORT ANNUAL
SES Value adjustment in respect of financial assets and of investments held as current assets 17 (22.5) 5.7 157 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
As at 31 December 2019
Statement of Changes in Shareholders’ Equity T115
EUR MILLION Subscribed capital Share premium Legal reserve Other reserves 1 Result for the year Total At 1 January 2018 719.0 1,890.2 70.0 1,765.5 (19.8) 4,424.9 Allocation of result - - - (19.8) 19.8 - Distribution of dividends - - - (367.6) - (367.6) Other movements ------Profit for the financial year - - - - 1,172.3 1,172.3 At 31 December 2018 719.0 1,890.2 70.0 1,378.1 1,172.3 5,229.6
At 1 January 2019 719.0 1,890.2 70.0 1,378.1 1,172.3 5,229.6 Allocation of result - - 1.9 1,170.4 (1,172.3) - Distribution of dividends - - - (368.2) - (368.2) Other movements - - - 0.1 - 0.1 Profit for the financial year - - - - 509.8 509.8 At 31 December 2019 719.0 1,890.2 71.9 2,180.4 509.8 5,371.3
1 Including reserves for own shares, other non available reserves and profit brought forward.
The accompanying notes form an integral part of the annual accounts. ANNUAL REPORT 2019 REPORT ANNUAL SES 158 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
The Company prepares consolidated financial statements for the SES Management makes estimates and assumptions that may affect the NOTES TO THE Group which are drawn up in accordance with International Financial reported amounts of assets and liabilities in the next financial year(s). Reporting Standards as endorsed by the European Union (‘IFRS’), and Estimates and judgments are regularly reevaluated, and are based on ANNUAL are published according to the provisions of the Luxembourg law. historical experience and other factors, including expectations of future events that are believed to be reasonable under the circum ACCOUNTS The Company’s Fiduciary Deposit Receipts (‘FDRs’) have been listed stances. on the Luxembourg Stock Exchange since 1998 and on Euronext Paris since 2004 under the symbol SESG. FDRs can be traded freely, and 2.2. Significant accounting policies As at 31 December 2019 are convertible into an equal number of Class A shares at any time, The main accounting policies and valuation rules applied by the Com and at no cost, at the option of the holder under the conditions appli pany are the following: cable in the Company’s articles of association, and in accordance with NOTE 1—GENERAL INFORMATION the terms of the FDRs. 2.2.1. Financial assets Shares in affiliated undertakings held by the Company are recorded SES S.A. (hereafter ‘SES’ or ‘the Company’) was incorporated on NOTE 2—SUMMARY OF SIGNIFICANT at acquisition cost. 16 March 2001 as a limited liability company (Société Anonyme) under ACCOUNTING POLICIES AND the laws of the Grand-Duchy of Luxembourg for an unlimited period. VALUATION RULES In the case of a permanent diminution in the value of a financial fixed asset in the opinion of the Board of Directors, a value adjustment is The registered office of the Company is established at the Château 2.1. Basis of preparation made such that the investment is valued at the lower figure. Value de Betzdorf, L-6815 Betzdorf, Luxembourg. The annual accounts are prepared in accordance with the Luxem adjustments are not maintained if the reasons for which they were bourg legal and regulatory requirements under the historical cost made have ceased to apply. The purpose of the Company is to take generally any interest what convention relating to the preparation and presentation of the annual soever in electronic media and to be active, more particularly, in the accounts. In some instances, where the Board of Directors believes that it is communications area via satellites and to invest, directly or indirectly, more appropriate under the circumstances and better reflects the in other companies that are actively involved in the satellite commu Accounting policies and valuation rules are, besides the ones laid substance of the activity, the interdependency of cash flows between nication industry. down by the amended Law of 19 December 2002, determined and SES subsidiaries, and their level of integration, have been taken into applied by the Board of Directors. account in assessing the carrying value of the financial assets. The accounting period of the Company is from 1 January to 31 December. The preparation of annual accounts requires the use of certain criti In those instances, investments in certain undertakings have been The Company has a 99.94% interest in a partnership, SES Global cal accounting estimates. It also requires the Board of Directors to grouped together for the purposes of testing them for impairment— Americas Holdings GP, whose accounts are integrated into those of exercise its judgment in the process of applying the accounting pol similarly to cash generating units (‘CGUs’) as defined in IAS 36 ‘Impair the Company to the level of its share in the partnership. icies. Changes in assumptions may have a significant impact on the ment of Assets’ under IFRS. annual accounts in the period in which the assumptions are changed. In 2013 the Company established a branch in Switzerland in order to Management believes that the underlying assumptions are appropri Loans to affiliated undertakings are valued at their nominal value. centralise the cash pooling mechanism in place for the Company and ate and that the annual accounts therefore present the financial posi Value adjustments are recorded on loans which appear to be partly its subsidiaries (‘the SES Group’). The annual accounts of the branch tion and results fairly. or wholly irrecoverable. These value adjustments are not maintained ANNUAL REPORT 2019 REPORT ANNUAL are also integrated into those of the Company. if the reasons for which they were made have ceased to apply. SES 159 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
2.2.2. Investments—own shares 2.2.5. Debtors Such financial instruments are used to reduce the SES Group’s expo Own shares are recorded at acquisition cost, including expenses inci Debtors are recorded at their nominal value. They are subject to value sure to risks in connection with operating liabilities denominated in dental thereto. At the balance sheet date, own shares are valued at adjustments where their recovery is uncertain. These value adjust US dollars, such as milestone payments to satellite manufacturers. the lower of acquisition cost and a valuation calculated on the basis ments are not continued if the reasons for which they were made have Such instruments are denominated in the same currency as the of weighted average cost or market value. ceased to apply. hedged item and can cover up to 100% of the total value of the hedged item. It is the Company’s policy not to enter into such forward con A value adjustment is recorded where the market value is lower than 2.2.6. Foreign currency translation tracts until a firm commitment is in place, and to match the terms of the acquisition cost. These value adjustments are not maintained if The Company maintains its books and records in euro (EUR). Trans hedge derivatives to those of the hedged item. the reasons for which the value adjustments were made have ceased actions expressed in currencies other than the euro are translated into to apply. euros at the exchange rates effective at the time of the transaction. Additionally, the Company has significant debenture loans denomi nated in US dollars. The Company may enter into derivatives, such as 2.2.3. Prepayments With the exception of fixed assets, all assets and liabilities denomi forward currency contracts or cross-currency swaps, in order to man Prepayments represent expenditures incurred during the financial nated in foreign currencies are converted at the rate of exchange age exchange rate exposure on foreign currency debt. year but relating to a subsequent financial year. ruling at the balance sheet date. Realised and unrealised gains and losses are recognised in the profit and loss account. Financial derivatives are revalued at the year-end using forward rates. Loan origination costs are recorded at their nominal value, and are Both unrealised gains and losses resulting from the revaluation of presented as prepayments. These costs are amortised over the remain Fixed assets acquired in currencies other than euro, with the excep these contracts are recognised in the profit and loss account under ing estimated loan periods based on the Company’s financing strategy. tion of the loans to affiliated undertakings, which are classified as ‘other interest and similar income’ or ‘other interest and similar fixed assets, are translated into euro at the exchange rate effective expenses’ respectively. SES does not use derivative financial instru 2.2.4. Dividends paid and received at the time of the transaction. At the balance sheet date, these ments for speculative purposes. Dividends are declared after the annual accounts for the year have been assets remain translated at historical exchange rates. approved. Accordingly, dividends payable are recorded in the sub Assets or liabilities generated by unrealised gains or losses are sequent year’s annual accounts. Dividends receivable on own shares The foreign exchange result for the year has been presented on a recognised and recorded under ‘amounts owed to / by affiliated under are recorded as income in the year in which the dividend is approved. net basis. takings’ where the counterparty is a member of the SES Group.
Dividends receivable from affiliated undertakings are recorded as 2.2.7. Derivative financial instruments 2.2.8. Creditors income in the year in which they are approved by the subsidiary. The Company may enter into contracts for derivative instruments, for Debenture loans and amounts owed to credit institutions are recorded example forward currency contracts, in order to manage the exchange at their reimbursement value. Where the amount repayable is greater rate exposure on the Company’s, and SES Group’s, assets, liabilities than the amount received, then the difference is shown as an asset and financial operations. and is written off over the period of the debt based on a straight-line basis over the term of the borrowing. ANNUAL REPORT 2019 REPORT ANNUAL SES 160 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
2.2.9. Share-based compensation NOTE 3—FINANCIAL ASSETS Employees of the Company receive remuneration in the form of share- based compensation payments, whereby employees render services A) SHARES IN AFFILIATED UNDERTAKINGS As at 31 December 2019, the Company held the following investments: to the Company as consideration for equity instruments. Movement in Shares in Affiliated Undertakings T116 Shares in Affiliated Undertakings T117 Four share-based payment schemes have been established by the Company and are available to members of the Company’s staff and EUR MILLION 2019 2018 EUR MILLION Historic cost to employees of the SES Group: Net book value Incorporation in 2019 2018 As at 1 January 8,161.1 8,120.3 SES Global – Equity settled plans: Increase - 40.8 Americas, Inc. United Sates 99.94% 3,477.6 3,477.6 1 Decrease (400.0) - SES Finance S.à r.l Luxembourg 100% 1,543.0 1,543.0 • The Stock Appreciation Rights Plan (‘STAR Plan’); As at 31 December 7,761.1 8,161.1 SES Holdings • Executive Incentive Compensation Plan (‘EICP’); (Netherlands) B.V.1 Netherlands 100% 1,241.4 1,241.4 • Long-Term Incentive Programme (‘LTIP’). Accumulated value adjustments SES Astra S.A. Luxembourg 100% 1,046.8 1,046.8 As at 1 January (104.7) (85.4) SES Participations S.A. Luxembourg 100% 106.8 206.8 Cash settled plan: Increase - (19.3) SES Insurance International Re As at 31 December (104.7) (104.7) • Simulated Restricted Stock Units plan (‘SRSU Plan’). (Luxembourg) S.A. Luxembourg 100% 90.3 90.3 SES Astra A.B. Sweden 32.34% 50.1 50.1 Net book value A charge, representing the difference between the acquisition cost SES Insurance of own shares and exercise price is recognised in the profit and loss As at 1 January 8,056.4 8,034.9 International (Luxembourg) S.A. Luxembourg 100% 15.2 15.2 account on the exercising of share option / shares. As at 31 December 7,656.4 8,056.4 SES Astra Services 1 The decrease in 2019 represents the share premium reduction in SES Astra Services Europe S.A. Luxembourg 100% 66.6 366.6 The SRSU Plan was inaugurated in 2017 and is replacing prospectively Europe S.A. in the amount of EUR 300.0 million and the share capital reduction in SES Participation S.A. in the amount of EUR 100.0 million. SES Latin America S.A Luxembourg 100% 18.6 18.6 the Star Plan. SRSUs are delivered on 1 June following a three-year Total 7,656.4 8,056.4 vesting period. Delivery occurs through a gross cash payment in the June payroll cycle instead of in SES FDR’s. 1 SES Holdings (Netherlands) B.V. has a 100% direct ownership of the entity New Skies Satellites B.V. and 100% indirect ownership of the entity O3b Networks Limited. Therefore for impairment testing purposes the investment is allocated between the For the cash settled plan, a charge corresponding to the number of SES GEO and SES MEO cash generating units. SRSUs outstanding at the share price on 31 December 2019 is recognised in the profit and loss account on a pro-rata basis over the vesting period and is presented as wages and salaries in the profit Management identified the following CGUs for the purpose of and loss account. A corresponding liability is recorded and presented impairment testing: in the balance sheet as other creditors. • SES GEO operations (‘SES GEO’), ANNUAL REPORT 2019 REPORT ANNUAL • SES MEO operations (‘SES MEO’), and
SES • MX1 and other service businesses (‘Services’). 161 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
The investment in SES Holdings (Netherlands) B.V., amounting to Impairment testing for SES MEO operations Article 65 Paragraph (1) 2º of the Law of 19 December 2002 on the EUR 1,241.4 million (2018: EUR 1,241.4 million), includes both SES GEO SES MEO operations, representing the O3b Networks business register of commerce and companies and the accounting and annual and SES MEO operations and was considered accordingly for impair acquired in 2016, is considered a separate CGU, as the business accounts of undertakings (the ‘Law’) requires the disclosure of the ment testing purposes. currently generates cash inflows that are largely independent from amount of capital and reserves and profit and loss for the last finan SES GEO operations. cial year of each affiliated undertaking. In conformity with Art. 67 (3) Impairment testing for SES GEO operations of the Law, these details have been omitted as the Company prepares Affiliated undertakings listed under ‘SES GEO operations’ form part For the SES MEO CGU, the impairment test period was extended consolidated accounts and these consolidated accounts, and the of the ‘SES GEO operations’ business of the SES Group. They are beyond the five-year business plan period, to 2034. This extension related consolidated management report and auditors’ report thereon, aggregated into one CGU for the purpose of testing their carrying was deemed necessary to fully capture the contracted capital expend have been lodged with the Luxembourg Trade Registry. values for impairment, considering the interdependency of their cash iture and expected growth of the business in connection with the O3b flows and their level of integration ›› see note 2. Loans to / from affil mPOWER constellation, which is scheduled to launch in 2021, as well iated undertakings which are part of SES GEO have also been added as to properly reflect the timing of replacement capital expenditure. to the carrying values of the affiliated undertakings. The pre-tax discount rate applied for 2019 was 9.32% (2018: 10.21%) The value-in-use of this CGU is determined based on a calculation and was selected to reflect market interest rates and commercial using the most recent business plan information approved by the spreads; the capital structure of businesses in the CGU’s business Board of Directors which covers a period of five years. This period sector; and the specific risk profile of the businesses concerned. The reflects the long-term contractual base for the satellite business. The terminal growth rate used in the valuations was 2.0% (2018: 2.0%), pre-tax discount rate used was 8.37% (2018: 8.40%) and was selected which reflects the most recent long-term planning assumptions to reflect market interest rates and commercial spreads; the capital approved by the Board of Directors and can be supported by refer structure of businesses in the SES Group’s business sector, and the ence to the trading performance of the companies concerned over a specific risk profile of the businesses concerned. The terminal growth longer period. rate used in the valuation was 2.0% (2018: 2.0%), which reflects the most recent long-term planning assumptions approved by the Board, Impairment testing for ‘Services’ operations and can be supported by reference to the performance of the SES Affiliated undertakings listed under ‘Services’ are services companies business concerned over a longer period in the relevant markets. of the SES Group. They are tested for impairment individually unless their carrying value is insignificant. An impairment test performed on each investment taken individually (the ‘line-by-line method’), would potentially lead to a different con Based on this impairment testing, the Board of Directors believes that clusion, in particular, for the investment held by the Company in SES no value adjustment should be recorded on the carrying values of the Global-Americas, Inc. However, for the reasons stated above and as shares in affiliated undertakings. described in ›› note 2.2.1., the Board of Directors of the Company does not believe that the ‘line-by-line method’ is appropriate considering the integrated nature of the SES GEO operations business and the interdependency of its cash flows. ANNUAL REPORT 2019 REPORT ANNUAL SES 162 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
B) LOANS TO AFFILIATED UNDERTAKINGS In 2019, the Company undertook an intragroup financial restructuring with the purpose of simplifying the financing relationships between Loans to affiliated undertakings as of 31 December 2019 consist of: SES Networks Lux S.à r.l., SES Networks Satellites S.à r.l. and other companies of the Group. As a result, the Company has granted two Loans to Affiliated Undertakings as of 31 December 2019 T118 new loans with maturity in October 2029 and interest rate of 3.33% to SES Networks Lux S.à r.l. in the amount of USD 922.7 million Principal and accrued interest 31 December 2019 (EUR 821.3 million) and to SES Networks Satellites S.à r.l. in the Counterparty (EUR million) Maturity Interest rate amount of USD 447.8 million (EUR 398.6 million). SES-15 S.à r.l 160.1 January-33 1.55% Furthermore, during the year, SES Finance Services A.G. has settled SES Astra 5B S.à r.l. 160.7 June-29 1.11% the outstanding loans payable in the amount of CHF 26.2 million SES Astra 2G S.à r.l. 120.0 June-30 1.19% (EUR 24.2 million). SES Astra 2F S.à r.l. 93.3 November-27 0.95% SES Astra 3B S.à r.l. 70.0 June-25 0.67% In December 2019, SES ASTRA Services Europe S.A. reduced its share SES-10 S.à r.l. 73.4 January-32 2.29% premium by EUR 300.0 million which was settled by: the assignment of SES Astra 2E S.à r.l. 22.5 February-29 1.06% a long-term loan receivable from HD Plus GmbH of EUR 60.0 million; SES Astra 1N S.à r.l. 21.8 November-26 0.80% through the current account with the Company of EUR 140.0 million; the HD Plus GmbH 60.0 October-22 4.50% assignment of a short-term loan receivable to SES Media Solutions GmbH SES Media Solutions GmbH 140.1 November-21 0.41% of EUR 70.0 million; and the assignment of a short-term loan receivable SES Americom Inc. 259.4 June-22 2.93% from HD Plus GmbH of EUR 30.0 million ›› see note 4. SES Networks Lux S.à r.l. 826.5 October-29 3.33% SES Networks Satellites S.à r.l. 401.1 October-29 3.33% The Company does not consider any balances on its loans to affiliates New Skies Satellites B.V. 190.5 November-23 3.87% as being irrecoverable as at 31 December 2019. New Skies Satellites B.V. 351.2 November-23 3.87% New Skies Satellites B.V. 5.0 December-24 3.87% New Skies Satellites B.V. 234.3 December-24 3.87% SES Holdings (Netherlands) B.V. 168.1 October-24 3.87% SES Holdings (Netherlands) B.V. 95.9 December-24 3.87% SES Holdings (Netherlands) B.V. 30.2 December-32 3.87% SES DTH do Brasil Ltda 1.3 May-23 5.77% SES DTH do Brasil Ltda 0.5 May-23 4.38% SES DTH do Brasil Ltda 0.5 May-22 4.10% SES DTH do Brasil Ltda 0.9 June-22 3.97% SES DTH do Brasil Ltda 0.9 September-22 4.23% ANNUAL REPORT 2019 REPORT ANNUAL SES DTH do Brasil Ltda 0.5 June-23 5.01%
SES SES DTH do Brasil Ltda 0.5 August-23 5.32% SES DTH do Brasil Ltda 0.5 November-23 5.48% Total 3,489.7 163 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Loans to affiliated undertakings as of 31 December 2018 consist of: NOTE 4—DEBTORS
Loans to Affiliated Undertakings as of 31 December 2018 T119 AMOUNTS OWED BY AFFILIATED UNDERTAKINGS Principal and accrued interest 31 December 2018 Counterparty (EUR million) Maturity Interest rate The SES Group operates a centralised treasury function at the level SES Americom Inc. 259.5 June-22 2.93% of the Company which manages, amongst others, liquidity to optimise funding costs. This is supported by a daily cash pooling mechanism. SES-15 S.à r.l 173.4 January-33 1.55% SES Astra 5B S.à r.l. 178.6 June-29 1.11% Amounts owed by affiliated undertakings as at 31 December 2019 of SES Astra 2G S.à r.l. 132.0 June-30 1.19% EUR 1,146.6 million (2018: EUR 2,323.0 million) consist of: SES Astra 2F S.à r.l. 106.7 November-27 0.95% SES Astra 3B S.à r.l. 84.0 June-25 0.67% Amounts owed by Affiliated Undertakings T120 SES-10 S.à r.l. 80.0 January-32 2.29% SES Astra 2E S.à r.l. 25.0 February-29 1.06% EUR MILLION 2019 2018 SES Astra 1N S.à r.l. 25.4 November-26 0.80% Intercompany current accounts 963.3 1,460.8 SES Finance Services A.G. 8.8 March-25 0.80% Short term loan to O3b Networks Limited - 709.2 SES Finance Services A.G. 8.8 March-25 0.80% Short term loan to Luxembourg satellite SES Finance Services A.G. 5.5 March-25 0.80% companies 83.3 83.3 New Skies Satellites B.V. 182.3 November-23 4.16% Short term loan to SES Asia S.A - 23.1 New Skies Satellites B.V. 334.5 November-23 4.16% Short term loan to SES Networks Lux S.à r.l. - 46.6 New Skies Satellites B.V. 4.9 December-24 4.16% Short term loan to HD Plus GmbH (Note 3) 30.0 - New Skies Satellites B.V. 231.2 December-32 4.16% Short term loan to SES Media Solutions GmbH (Note 3) 70.0 - SES Holdings (Netherlands) B.V. 164.8 October-24 4.16% Total 1,146.6 2,323.0 SES Holdings (Netherlands) B.V. 88.4 December-24 4.16% SES Holdings (Netherlands) B.V. 35.4 December-24 4.16% Forward Sale Agreement with SES mPower S.à r.l. 478.2 174.1 SES Media Solutions GmbH 140.0 November-21 0.41% SES DTH do Brasil Ltda 1.2 May-23 5.77% SES DTH do Brasil Ltda 0.6 May-23 4.38% Intercompany current accounts represent short-term advances bear SES DTH do Brasil Ltda 0.5 May-22 4.10% ing interest at market rates. The Company performed an analysis of SES DTH do Brasil Ltda 1.2 June-22 3.97% the amounts owed by affiliated undertakings and does not consider SES DTH do Brasil Ltda 1.2 September-22 4.23% their recoverability to be uncertain. SES DTH do Brasil Ltda 0.6 June-23 5.01% SES DTH do Brasil Ltda 0.6 August-23 5.32% In 2019, the Company undertook an intragroup financial restructuring ANNUAL REPORT 2019 REPORT ANNUAL SES DTH do Brasil Ltda 0.5 November-23 5.48% with the purpose of simplifying the financing relationships with
SES Total 2,275.6 other companies of the Group. As a result, the short term loan to O3b Networks Limited has been settled during the year. 164 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
In 2018, SES entered into a forward sale agreement with SES mPower NOTE 6—SUBSCRIBED CAPITAL AND NOTE 7—LEGAL RESERVE S.à r.l ›› see note 11 in connection with the fleet of seven mPOWER SHARE PREMIUM ACCOUNT satellites currently under construction. As at 31 December 2019, In accordance with Luxembourg legal requirements, a minimum of 5% SES had a receivable from SES mPower S.à r.l of USD 537.2 million SES has a subscribed capital of EUR 719.0 million (2018: EUR 719.0 mil of the annual net profit is transferred to a legal reserve. This require (EUR 478.2 million) in the framework of this agreement. lion), represented by 383,457,600 Class A shares (2018: 383,457,600) ment is satisfied when the reserve reaches 10% of the issued share and 191,728,800 Class B shares (2018: 191,728,800) with no par value. capital. This reserve may not be distributed. NOTE 5—INVESTMENTS—OWN SHARES Although they constitute separate classes of shares, Class A and Class B shares have the same rights except that Class B shares, which are NOTE 8—RESERVE FOR OWN SHARES Own shares refer to the Company’s own Fiduciary Deposit Receipts. held by the State of Luxembourg and by two entities wholly-owned by All FDRs in respect of Class A shares owned by the Company are for the State of Luxembourg, entitle their holders to only 40% of the divi In accordance with the Law, the Company has created a non-distrib use in connection with the share-based compensation plans for exec dend, or in case the Company is dissolved, to 40% of the net liquidation utable ‘reserve for own shares’ for an amount of EUR 58.9 million (2018: utives and staff of the SES Group. FDRs are valued at the lower of the proceeds paid to shareholders of Class A. Class B shares are not freely EUR 93.4 million), corresponding to the balance of the own shares weighted average cost and the market price. traded. Each share, whether of Class A or Class B, is entitled to one vote. held as of year end.
As at 31 December 2019, the Company owned 4,708,584 FDRs (2018: The movement between the opening and closing number of shares ACQUISITION OF TREASURY SHARES 5,589,589) representing a carrying value of EUR 58.9 million (2018: issued per class of share can be summarised as follows: EUR 93.4 million). SES has historically, in agreement with its shareholders, purchased Movement between the Opening FDRs in connection with executives’ and employees’ share-based pay and Closing Number of Shares T121 ments plans, as well as for cancellation.
Class A Class B Total shares shares shares As at 1 January 2019 383,457,600 191,728,800 575,186,400 Shares issued during the year - - - As at 31 December 2019 383,457,600 191,728,800 575,186,400 As at 1 January 2018 383,457,600 191,728,800 575,186,400 Shares issued during the year - - - As at 31 December 2018 383,457,600 191,728,800 575,186,400 ANNUAL REPORT 2019 REPORT ANNUAL SES 165 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 9—CREDITORS A) DEBENTURE LOANS—NON CONVERTIBLE LOANS
The maturity profile of notes and bonds is as follows as at 31 December 2019. The maturity profile of notes and bonds is as follows as at 31 December 2018.
Maturity Profile of Notes and Bonds as at 31 December 2019 T122 Maturity Profile of Notes and Bonds as at 31 December 2018 T123
Creditors—Financial liabilities Interest rate Maturity EUR million Creditors—Financial liabilities Interest rate Maturity EUR million a) Debenture loans—Non convertible loans 5,663.3 a) Debenture loans—Non convertible loans 5,576.3
becoming due and payable within one year1 788.1 becoming due and payable within one year 1 576.3 EUR 650 million Eurobond (2020) 4.625% March-20 650.0 Non convertible bonds due >1 Y: Accrued interest 139.6 Non convertible bonds due >1 Y: Accrued interest 138.1 144A Bond USD 500.0 million (2019) 2.50% March-19 436.7
becoming due and payable between 1 and 2 years 650.0 becoming due and payable between 1 and 2 years 650.0 EUR 650 million Eurobond (2021) 4.75% March-21 650.0 EUR 650 million Eurobond (2020) 4.625% March-20 650.0
becoming due and payable between 3 and 5 years 817.6 becoming due and payable between 3 and 5 years 650.0 144A Bond USD 750.0 million (2023) 3.60% April-23 667.6 EUR 650 million Eurobond (2021) 4.75% March-21 650.0 German Bond issue of EUR 150.0 million (2024) Floating June-24 150.0 becoming due and payable after 5 years 3,700.0 becoming due and payable after 5 years 3,407.6 EUR 140.0 million Private Placement (2027) 4.00% May-27 140.0 EUR 140.0 million Private Placement (2027) 4.00% May-27 140.0 144A Bond USD 750.0 million (2023) 3.60% April-23 655.0 144A Bond USD 250.0 million (2043) 5.30% April-43 222.5 144A Bond USD 250.0 million (2043) 5.30% April-43 218.3 144A Bond USD 500.0 million (2044) 5.30% March-44 445.1 144A Bond USD 500.0 million (2044) 5.30% March-44 436.7 German Bond issue of EUR 50.0 million (2032) 4.00% November-32 50.0 German Bond issue of EUR 50.0 million (2032) 4.00% November-32 50.0 EUR 750 million deeply subordinated fixed rate resettable securities 4.625% January-222 750.0 EUR 750 million deeply subordinated fixed rate resettable securities 4.625% January-222 750.0 EUR 550 million deeply subordinated fixed rate resettable securities 5.625% January-242 550.0 EUR 550 million deeply subordinated fixed rate resettable securities 5.625% January-242 550.0 EUR 500 million Eurobond (2026) 1.625% March-26 500.0 EUR 500 million Eurobond (2026) 1.625% March-26 500.0 EUR 500 million Eurobond (2027) 0.875% November-27 500.0 German Bond issue of EUR 150.0 million (2024) Floating June-24 150.0 German Bond issue of EUR 250.0 million (2025) 1.71% December-25 250.0 German Bond issue of EUR 250.0 million (2025) 1.71% December-25 250.0
1 Includes accrued interest of EUR 138.1 million at year-end 2019 (2018: EUR 139.6 million). 1 Includes accrued interest of EUR 139.6 million at year-end 2018 (2017: EUR 134.1 million). 2 Representing first reset date 2 Representing first reset date ANNUAL REPORT 2019 REPORT ANNUAL SES 166 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
European Medium-Term Note Programme (‘EMTN’) 144A Bond USD 750.0 million (2023) 144A Bond USD 250.0 million (2043) SES has a EMTN Programme enabling SES, or SES Global Americas In 2013 SES completed a 144A offering in the US market issuing In 2013 SES completed a 144A offering in the US market issuing Holdings GP, to issue as and when required notes up to a maximum USD 750.0 million 10-year bond with a coupon of 3.60% and a final USD 250.0 million 30-year bond with a coupon of 5.30% and a final aggregate amount of EUR 4,000.0 million. As at 31 December 2019, maturity date on 4 April 2023. maturity date on 4 April 2043. SES had issued EUR 2,440.0 million (2018: EUR 1,940.0 million) under the EMTN Programme with maturities ranging from 2020 to 2027. EUR 500.0 million Eurobond (2026) 144A Bond USD 500.0 million (2044) In 2018 SES issued a EUR 500.0 million 8-year bond under the In 2014 SES completed a 144A offering in the US market issuing EUR 500.0 million Eurobond (2018) Company’s European Medium-Term Note Programme. The bond USD 500.0 million 30-year bond with a coupon of 5.30% and a final SES repaid its EUR 500.0 million bond on 24 October 2018 which was bears interest at a fixed rate of 1.625% and has a final maturity date maturity date of 25 March 2044. issued under the Company’s European Medium-Term Note Pro on 22 March 2026. gramme and was bearing and interest at a fixed rate of 1.875%. German bond issue of EUR 400.0 million (2024 / 2025) EUR 500.0 million Eurobond (2027) In 2018 the Group closed the issuance of an aggregated amount of 144A Bond USD 500.0 million (2019) On 4 November 2019, SES issued a EUR 500.0 million bond under the EUR 400.0 million in the German bond (‘Schuldschein’) market. The SES repaid its USD 500.0 million 5-year bond with a coupon of 2.50%, Company’s European Medium-Term Note Programme. The bond has transaction consists of two individual tranches—a EUR 150.0 million on 25 March 2019. an 8-year maturity and bears interest at a fixed rate of 0.875% and tranche with a floating interest rate of a six-month EURIBOR plus has a final maturity date on 4 November 2027. a margin of 0.8% and a final maturity date on 18 June 2024 as well EUR 650.0 million Eurobond (2020) as a EUR 250.0 million tranche with a fixed interest rate of 1.71% SES issued a EUR 650.0 million bond under the Company’s European EUR 550.0 million Deeply Subordinated Fixed Rate and a final maturity date on 18 December 2025. Medium-Term Note Programme in 2010. The bond has a 10-year matu Resettable Securities (2024) rity and bears interest at a fixed rate of 4.625%. In November 2016 SES issued a second perpetual bond of EUR 550.0 million at a coupon of 5.625% to the first call date, a price EUR 650.0 million Eurobond (2021) of 99.304% and a yield of 5.75%. SES is entitled to call the second per SES issued a EUR 650.0 million bond under the Company’s European petual bond on 29 January 2024 and on subsequent coupon payment Medium-Term Note Programme in 2011. The bond has a 10-year dates. maturity and bears interest at a fixed rate of 4.75%. EUR 140.0 million Private Placement (2027) EUR 750.0 million Deeply Subordinated Fixed Rate In 2012 SES issued three individual tranches of a total EUR 140.0 mil Resettable Securities (2022) lion Private Placement under the Company’s European Medium-Term On 10 June 2016 SES issued EUR 750.0 million Deeply Subordinated Note Programme with ING Bank N.V. The Private Placement has a Fixed Rate Resettable Securities (‘perpetual bond’) at a coupon of 15-year maturity, beginning 31 May 2012, and bears interest at a fixed 4.625% to the first call date, a price of 99.666% and a yield of 4.7%. rate of 4.00%. SES is entitled to call the securities on 2 January 2022 and on subsequent coupon payment dates. German bond issue of EUR 50.0 million (2032) In 2012 the Group signed an agreement to issue EUR 50.0 million in the German bond (‘Schuldschein’) market. The German bond bears ANNUAL REPORT 2019 REPORT ANNUAL a fixed interest rate of 4.00% and matures on 12 November 2032. SES 167 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
B) AMOUNTS OWED TO CREDIT INSTITUTIONS Syndicated loan 2021 2017 this programme was updated and extended. As at 31 December 2019 In June 2019 the Company renewed its previous syndicated loan facil and 2018, no borrowings were outstanding under this programme. Amounts owed to credit institutions as of 31 December 2019 were: ity (‘Syndicated loan 2015’). The updated facility is being provided by 20 banks and has been structured as a 5-year multi-currency revolv Negotiable European Commercial Paper ‘NEU CP’ Amounts owed to Credit Institutions ing credit facility with an option to extend until 2026 (two one-year (previous French Commercial paper programme) as of 31 December 2019 T124 extension options at the discretion of the lenders). The facility is for In 2005 SES put in place a EUR 500.0 million ‘NEU CP’ programme in Interest EUR EUR 1,200.0 million and the interest payable is linked to a ratings grid. accordance with articles L.213-1 to L213-4 of the French Monetary Creditors—Financial liabilities rate Maturity million At the current SES credit rating of BBB- / Baa2, the interest rate is and Financial Code and article 6 of the order of 30 May 2016 and b) amounts owed 45 basis points over EURIBOR / LIBOR. As at 31 December 2019 and subsequent amendments. The maximum outstanding amount of to credit institutions 2018, no amount has been drawn under this facility. ‘NEU CP’ issuable under the programme is EUR 500.0 million or its becoming due and payable counter value at the date of issue in any other authorised currency. within one year 41.2 EUR 522.9 million COFACE facility On 18 April 2019, this programme was extended for one further year. EURIBOR various in In 2009 SES signed a financing agreement with Compagnie Française As at 31 December 2019 and 2018, no borrowings were outstanding COFACE facility +1.70% 2020 41.2 d’Assurance pour le Commerce Extérieur (‘Coface’) in respect of the under this programme. becoming due and payable investment in four geostationary satellites (ASTRA 2E, ASTRA 2F, after more than one year 80.9 ASTRA 2G, ASTRA 5B). The facility is divided into five loans. The The aggregate maturity profile of amounts drawn from credit institu EURIBOR various from COFACE facility +1.70% 2021 to 2022 80.9 drawings under the facility were based on invoices from the supplier tions and becoming due and payable after more than one year is as of the satellites. The first drawing was done on 23 April 2010 and all follows as at 31 December 2019 and 2018: loan tranches became fully drawn in November 2014. Each Coface tranche is repayable in 17 equal semi-annual instalments where Coface Maturity Profile of Amounts owed to Credit Institutions T126 Amounts owed to credit institutions as of 31 December 2018 were: A has a final maturity date of 1 August 2022, Coface F will mature on 21 May 2021 and Coface C and D will mature on 3 October 2022. The EUR MILLION 2019 2018 Amounts owed to Credit Institutions entire facility bears interest at a floating rate of six-month EURIBOR Between one and two years 80.9 82.4 as of 31 December 2018 T125 plus a margin of 1.7%. Between two and five years - 39.7 Total 80.9 122.1 Interest EUR Creditors—Financial liabilities rate Maturity million In November 2017, SES opted to execute voluntary prepayment clauses pursuant to the Agreement and repaid the remaining out b) amounts owed to credit institutions standing amount of Coface tranche B as per 21 November 2017. All During the year 2019, SES repaid floating rate obligations totaling other Coface tranches remain in place as contracted. EUR 41.2 million (2018: EUR 41.5 million) related to various Coface becoming due and payable within one year 42.0 instalments. EURIBOR various in European Commercial paper programme COFACE facility +1.70% 2019 42.0 In 2012 SES incepted a joint EUR 1,000.0 million guaranteed European Committed and uncommitted loan facilities becoming due and payable commercial paper programme of SES S.A. and SES Global Americas As at 31 December 2019, and as at 31 December 2018, the Company after more than one year 122.1 Holdings GP. Issuances under the programme represent senior unsecured had no outstanding balances under uncommitted loan facilities. EURIBOR various from obligations of the issuer and are guaranteed by the non-issuing entity.
ANNUAL REPORT 2019 REPORT ANNUAL COFACE facility +1.70% 2020 to 2022 122.1 The programme is rated by Moody’s Investors Services and is com
SES pliant with the standards set out in the STEP Market Convention. In 168 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
C) AMOUNTS OWED TO AFFILIATED NOTE 10—OTHER CREDITORS— The balance sheet tax position represents the net amount payable UNDERTAKINGS TAX AUTHORITIES to, or receivable from, the Luxembourg tax authorities by the Com pany in its role as head of the tax unity. Amounts owed to affiliated undertakings of EUR 2,263.6 million (2018: The Company is subject to the tax regulations in Luxembourg, in EUR 2,637.8 million) include the following: Switzerland for the Swiss branch, and in the U.S. for the partnership. The respective tax charge / income of each subsidiary is computed In accordance with Article 164bis of the Luxembourg income tax law, on a stand-alone basis and recharged via intercompany accounts. Amounts owed to Affiliated Undertakings T127 SES S.A. is the head of the Luxembourg tax unity with its direct and indirect subsidiaries as follows: NOTE 11—OTHER CREDITORS—PAYABLE EUR MILLION 2019 2018 AFTER MORE THAN ONE YEAR Long-term loans (maturity after five years) 611.7 68.0 • SES Astra S.A.; Current accounts 1,651.9 2,569.8 • SES Asia S.A.; Acquisition of SES mPOWER medium-Earth orbit Total 2,263.6 2,637.8 • SES-15 S.à r.l.; constellation • SES-10 S.à r.l.; In September 2017, the Company, jointly with O3b Networks Limited, • SES Participations S.A.; entered as Procurement Agents into a Master Procurement Agency ‘Current accounts’ are linked to the daily cash pooling mechanism and • SES Astra 3B S.à r.l.; and Option Agreement with a financial institution in connection with represent short term debts bearing interest at market rates. The daily • SES Astra 1KR S.à r.l.; the procurement by that financial institution of seven medium-Earth cash pooling mechanism supports, among others, the liquidity of the • SES Astra 1L S.à r.l.; orbit satellites from The Boeing Company. Group in order to optimize the funding costs. • SES Astra 1M S.à r.l.; • SES Astra 1N S.à r.l.; At the end of the satellite construction period, which is foreseen in As at 31 December 2019, long term loans included: • SES Engineering S.à r.l.; 2021, the SES Group will have the right to acquire, or lease, the • SES Astra 5B S.à r.l.; satellites from the financial institution or to direct their sale to a • A loan for a total amount of USD 51.2 million (EUR 45.6 million) from • SES Astra 2E S.à r.l.; third-party. SES Satellites Gibraltar Ltd. with a maturity date of May 2025 and • SES Astra 2F S.à r.l.; bearing interest at a rate of 4.2%; • SES Astra 2G S.à r.l. ; SES has the right to nominate the entity within the SES Group which • A loan for a total amount of EUR 23.3 million from SES ASTRA Real • SES Astra Services Europe S.A.; will acquire or lease those assets shortly before the end of the Estate S.A. with a maturity date of May 2025 and a bearing interest • SES Lux Finance S.à r.l.; construction period. at a rate of 2.0%; • SES Networks Lux S.à r.l. ; • In March 2019, SES Americom Inc. granted a new long-term loan to • SES Astra Real Estate (Betzdorf) S.A. ; SES management expects that the satellites will be acquired or leased the Company for a total amount of USD 596.6 million with a maturity • SES Techcom S.A.; in due course by the company SES mPower S.à r.l. in Luxembourg. To date of March 2024 and bearing interest at a rate of 3.7%. As at • SES Latin America S.A.; this end the Company entered into a forward sale agreement with 31 December 2019, the outstanding balance, including accrued inter • SES Insurance International (Luxembourg) S.A.; that entity as at 29 May 2018 whereby as the satellite construction est, amounted to USD 615.4 million (EUR: 542.8 million). • SES Insurance International Re (Luxembourg) S.A.; process proceeds, and the Procurement Agents confirm that con • SES-17 S.à r.l.; struction milestones are achieved, then the underlying asset-under- • SES mPower S.à r.l. ; construction is transferred by the Company to that entity against an • SES Networks Satellites S.à r.l. ; intercompany receivable. ANNUAL REPORT 2019 REPORT ANNUAL • SES Finance S.à r.l.; SES 169 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
Since the underlying Satellite Purchase and Sale Agreement is directly In 2018, total staff costs include an amount of EUR 4.4 million total NOTE 16—OTHER INTEREST RECEIVABLE between the financial institution and The Boeing Company then there gross remuneration paid to the two departing Executive Commit AND SIMILAR INCOME is no contractual obligation on the side of the Procurement Agents tee members. during the satellite construction process. Other interest receivable and similar income includes the following: NOTE 14—INCOME FROM PARTICIPATING However SES management takes the view that there is a constructive INTERESTS Other Interest Receivable and Similar Income T131 obligation arising over the construction period and hence the SES Group is accruing for the costs of this programme. Income from participating interests concerning affiliated undertak EUR MILLION 2019 2018 ings consists of the following: Interest income from current account 2.2 3.1 As at 31 December 2019 an amount of EUR 478.2 million (USD 537.2 million) Other interest income from affiliated undertak- ings 55.8 51.8 was recorded under the caption ‘Other creditors—becoming due and Income from Participating Interests T129 payable after one year’, corresponding to the constructive obligation by Income from external Swap - 7.3 the Company towards the financial institution procuring the satellites. EUR MILLION 2019 2018 Total 58.0 62.2 Corresponding amount due to the Company from SES mPower S.à r.l. Dividends received from affiliated undertakings 652.7 1,354.7 under a forward purchase agreement, was disclosed on the balance sheet Total 652.7 1,354.7 under the caption ‘Amounts owed by affiliated undertakings—becoming NOTE 17—VALUE ADJUSTMENTS due and payable after one year’. IN RESPECT OF FINANCIAL ASSETS Dividends received on own shares in the amount of million EUR 4.3 million AND INVESTMENTS HELD AS CURRENT NOTE 12—OTHER OPERATING INCOME (2018: EUR 4.7 million). Dividend received from affiliated untertakings ASSETS EUR 648.4 million (2018: EUR 1,350.0 million). Other operating income of EUR 24.2 million (2018: EUR 16.8 million) The loss of EUR 22.5 million (2018: gain of EUR 25.0 million) is com consists mainly of intra-group recharge income from advisory support NOTE 15—INCOME FROM OTHER INVESTMENTS posed of a loss on disposal of the Company’s FDRs for EUR 30.0 million services rendered to various affiliates. AND LOANS (2018: loss of EUR 11.2 million) and a value adjustment on outstanding FDRs as at 31 December 2019 of EUR 7.6 million (2018: EUR 36.2 million). NOTE 13—STAFF COSTS Income from other investments and loans forming part of fixed assets: A value adjustment was recorded to account for the FDRs at the lower As at 31 December 2019, the number of full time equivalent employees Income from Other Investments and Loans T130 of the weighted average cost and the market price. The price of the was 68 (2018: 57) and the average number of employees in the work SES FDR listed on Euronext in Paris was EUR 12.50 as at 31 Decem force for 2019 was 60 (2018: 61). Staff costs can be analysed as follows: EUR MILLION 2019 2018 ber 2019 (2018: EUR 16.71). Interest income from affiliated undertakings 66.9 19.1 Staff Costs T128 Total 66.9 19.1 In 2019, the value of the impairment on shares in affiliated under takings is nil (2018: loss of EUR 19.3 million) ›› see note 3. EUR MILLION 2019 2018 Wages and salaries 10.4 18.7 Social security costs and other staff costs 2.1 1.6 ANNUAL REPORT 2019 REPORT ANNUAL Total 12.5 20.3 SES 170 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
NOTE 18—INTEREST PAYABLE Fees incurred in connection with other assurance and non-audit GUARANTEES AND SIMILAR EXPENSES services rendered to the Company and its controlled undertakings as defined by the Regulation (EU) N º 537 / 2014 amounted to EUR 0.2 million On 31 December 2019 the Company had outstanding bank guarantees A) CONCERNING AFFILIATED UNDERTAKINGS (2018: EUR 0.2 million) and represented primarly interim dividends provided for an amount of EUR 101.3 million (2018: EUR 118.0 million) reviews and contractual audits, comfort letters issued in connection with respect to performance and warranty guarantees for services of Interest Payable and Similar Expenses to the Company’s financial transactions and tax compliance services. satellite operations. concerning Affiliated Undertakings T132 NOTE 20—BOARD OF DIRECTORS’ PARENTAL GUARANTEES EUR MILLION 2019 2018 REMUNERATION Interest charges from current account 45.3 35.2 SES S.A. issued a letter of guarantee to one of its subsidiaries to Total 45.3 35.2 Total payments to directors for attendance at board and committee provide sufficient financial support to meet its obligations in full for meetings in 2019 amounted to EUR 1.2 million (2018: EUR 1.3 million). at least two years after the issuance date of the 31 December 2019 These payments are computed on a fixed and variable basis, the stand alone financial statements of the subsidiary. B) OTHER INTEREST AND SIMILAR EXPENSES variable part being based upon attendance at board and committee meetings. LITIGATION Other interest and similar financial expenses include the following: NOTE 21—OFF BALANCE SHEET SES S.A. is not currently subject to any material legal proceedings or Other Interest Payable and Similar Expenses T133 COMMITMENTS litigation arising in the normal course of business. EUR MILLION 2019 2018 CAPITAL COMMITMENTS NOTE 22—SUBSEQUENT EVENTS Interest charges 227.0 233.4 Loan origination costs 8.8 12.9 On 11 September 2017, SES S.A., jointly with O3b Networks Limited, There were no significant events between the balance sheet date and Loss on disposal on own shares 0.8 0.4 entered as Procurement Agents into a Master Procurement Agency the approval of the annual accounts which would have influenced the Foreign exchange gains, net 0.2 7.9 and Option Agreement with a financial institution in connection with results of the Company as at 31 December 2019. Total 236.8 254.6 the procurement by that financial institution of seven medium-Earth orbit satellites from The Boeing Company. The outstanding commit ments of the Company in respect of the related contracted capital expenditure as at 31 December 2019 amounting to USD 306.9 million NOTE 19—AUDIT FEES (EUR 273.2 million).
Art. 65 Paragraph (1) 16º of the Law requires the disclosure of the The Company is currently in the process of procuring SES-17; this independent auditor fees. satellite is expected to be launched in the first half of 2021. The Com pany had outstanding commitments in respect of the related con In conformity with the Law these details have been omitted as the tracted capital expenditure as at 31 December 2019 amounting to Company prepares consolidated accounts in which this information EUR 126.1 million. ANNUAL REPORT 2019 REPORT ANNUAL is disclosed and these consolidated accounts and the related consol
SES idated management report and auditors’ report thereon have been lodged with the Luxembourg Trade Registry. 171 172 SES ANNUAL REPORT 2019 COMPANY OUR 1 REPORT AND STRATEGIC OPERATIONAL 2 STATEMENTS FINANCIAL CONSOLIDATED 3
5 INFORMATION ADDITIONAL
ACCOUNTS SES S.A.ANNUAL 4 INFORMATION ADDITIONAL 5 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
ADDITIONAL INFORMATION
GLOSSARY OF ALTERNATIVE PERFORMANCE MEASURES
For further explanations of financial terms please ›› see note 2–‘Consolidated statements’
EBITDA and EBITDA margin: EBITDA is defined as profit for the NET DEBT: Net debt is defined as current and non-current borrow OPERATING PROFIT and OPERATING PROFIT margin: Operating period before the impact of depreciation, amortisation, net financing ings less cash and cash equivalents, all as disclosed on the consoli profit is defined as profit for the year before the impact of net financ cost and income tax. EBITDA Margin is defined as EBITDA divided by dated statement of financial position. The Group believes that net ing charges, income tax, the Group’s share of the results of associates revenue. The Group believes that EBITDA and EBITDA margin are debt is relevant to investors, since it gives an indication of the abso and includes any extraordinary line item between revenue and profit useful supplemental indicators that may be used to assist in evaluat lute level of non-equity funding of the business. This can be compared before tax in the Group’s consolidated income statement. The Group ing a Company’s operating performance to the income and cash flows generated by the business, and availa uses operating profit to monitor its financial return after both oper ble undrawn facilities ating expenses and a charge representing the cost of usage of both its property, plant and equipment and definite-life intangible assets NET DEBT to EBITDA ratio: Net debt to EBITDA ratio is defined as net debt divided by EBITDA. The Group believes that net debt to Operating profit margin is defined as operating profit as a percentage EBITDA ratio is a useful measure to demonstrate to investors its abil of revenue. SES believes that operating profit margin is a useful meas ity to generate the income needed to be able to settle its loans and ure to demonstrate the proportion of revenue that has been realised borrowings as they fall due as operating profit, and therefore an indicator of profitability ANNUAL REPORT 2019 REPORT ANNUAL SES 173 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
GLOSSARY A G L S AMF: Autorité des Marchés Financiers (French GDPR: General Data Protection Regulation LEO: Low Earth Orbit SatCom sector: Satellite Communication sector markets authority) GEO: Geostationary Earth Orbit SDA: Space Data Association GHG: Greenhouse Gas SDN: Software Defined Networking GovSatCom: Government Satellite Communica M SDGs: Sustainable Development Goals C tions MEO: Medium Earth Orbit SESG: Societal, Environmental, Social and C-band: Frequency range assigned to satellite Mbit: Mega Bit Governance communication systems, approximately 4 GHz for MHz: Mega Hertz SDGs: Sustainable Development Goals the downlink and 6 GHz for the uplink. H SLT: Senior Leadership Team COSO: Committee of Sponsoring Organisations HDTV: High-definition TV SOC: Satellite Operations Centre of the Treadway Commission HTS: High-throughput satellites N SSAE: Statement on Standards for Attestation CDP: Carbon Disclosure Project NGSO: Non-Geostationary Orbit Engagements CES: Customer Effort Score NOC: Network Operation Centre CSAT: Customer Satisfaction I NPS: Net Promotor Score, Loyalty indicator IFC: Inflight Connectivity U IPTV: Internet Protocol Television UHD: Ultra HD D ISR: Intelligence, Surveillance, and Reconnais O DOD: US Department of Defense sance ONAP: Open Network Automation Platform DTC: Direct-to-Cable ITU: International Telecommunication Union OTT: Over-The-Top DTH: Direct-to-Home OUTV: Occasional Use TV DTT: Digital terrestrial TV K Ka-band: Frequency range assigned to satellite P E communication systems, approximately 20 GHz POP: Points of presence ESG: Environmental, Social and Governance for the downlink and 30 GHz for the uplink. EVA: Economic value added Ku-band: Frequency range assigned to satellite communications systems, approximately 14 GHz F for the uplink and 11 GHz for the downlink. FTA: free to air ANNUAL REPORT 2019 REPORT ANNUAL SES 174 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
LIST OF TABLES AND GRAPHICS
TABLES TABLES TABLES
Name Number Page Name Number Page Name Number Page Global IP Traffic by Region 01 30 USD Exchange Rate 20 109 Movement in deferred Income Tax Liabilities 42 119 Revenue by Business Unit 02 37 Net Debt 21 112 Components of Other Comprehensive Income 43 119 Revenue, Operating Expenses and EBITDA 03 42 EBITDA 22 112 Profit Attributable to Owners 44 120 Depreciation, Amortisation and Operating Profit 04 42 EBITDA Margin 23 113 A- and B-shares 45 120 Profit Attributable to SES Shareholders 05 42 Operating Profit 24 113 Diluted Earnings per Share 46 120 Free Cash Flow before Financing Activities 06 43 Operating Profit Margin 25 113 Weighted Average Number of Shares 47 120 Net Debt to EBITDA Ratio 07 43 Net Debt to EBITDA Ratio 26 113 Dividends Declared and Paid 48 120 Full Year 2019 Financial Outlook 08 44 Operating Profit Reported 27 114 Dividend Proposed 49 120 Non-financial Statement Disclosures in Operating Profit at Constant FX 28 114 Property, Plant and Equipment 2019 50 121 the relevant Chapters of the Report 09 46 Revenue by Business Unit 2019 and 2018 29 114 Property, Plant and Equipment 2018 51 122 SES Group CO2 Results 10 50 Revenue by Business Unit 2018 and 2017 30 114 Impairment Charge and Assumptions 2019 52 123 Shareholder Structure as of 3 February 2020 11 57 Revenue by Category 2019 31 115 Impairment Charge and Assumptions 2018 53 123 Committee Membership and Meetings 12 88 Revenue by Category 2018 32 115 Assets in the Course of Construction 2019 54 124 CONSOLIDATED FINANCIAL STATEMENTS Revenue by Country 33 115 Assets in the Course of Construction 2018 55 124 Consolidated Income Statement 13 149 Property, Plant and Equipment and Intangible Assets 2019 56 125 Intangible Assets by Location 34 115 Consolidated Statement of Intangible Assets 2018 57 125 Comprehensive Income 14 96 Cost of Sales 35 116 Goodwill: Pre-tax Discount Rates for CGU 58 126 Consolidated Statement of Financial Position 15 97 Audit and Non-Audit Fees 36 116 Goodwill: Net Book Value 59 127 Consolidated Statement of Cash Flows 16 98 Finance Income and Costs 37 116 Orbital Slots Licence Rights: Consolidated Statement of Income Taxes 38 117 Pre-Tax discount Rates for CGU 60 127 Changes in Shareholders’ Equity 17 99 Income Tax Reported in the Orbital Slot Licence Rights: Net Book Value 61 127 Consolidated Statement of Consolidated Income Statement 39 117 Definite Life Intangible Assets 2019 62 128 Changes in Shareholder’s Equity 18 100 Deferred Income Tax 40 118 Definite Life Intangible Assets 2018 63 128 Asset lives 19 105 Movement in deferred Income Tax Assets 41 119 ANNUAL REPORT 2019 REPORT ANNUAL SES 175 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
TABLES TABLES TABLES
Name Number Page Name Number Page Name Number Page Assets and Liabilities Related to Cash and Cash Equivalents 80 136 Long-term Incentive Programme: average Value Contracts With Customers 64 128 Issued Capital 81 136 of Inputs to the Model used for 2018 94 141 Movement in Deferred Income 2019 65 129 Buy-Back of Treasury Shares 82 137 Interest-Bearing Borrowings 2019 95 141 Movement in Deferred Income 2018 66 129 Summarised Financial Information for each Interest-Bearing Borrowings 2018 96 141 Trade and Other Receivables 67 129 Subsidiary that has Non-Controlling Interests: Provisions 97 143 Movement in the Provision for the Impairment Balance Sheet 83 138 Movements in Each Class of Provisions 98 143 of Trade and other Receivables 68 129 Summarised Financial Information for each Trade and Other Payables 99 144 As at 31 December 2019 – Fair Values 69 130 Subsidiary that has Non-Controlling Interests: Statement of Comprehensive Income 84 138 Other Long-Term Liabilities 100 149 As at 31 December 2018 – Fair Values 70 131 Summarised Financial Information for each Fixed Assets Suppliers 101 144 Projected Contractual Undiscounted Cash Flows Subsidiary that has Non-Controlling Interests: Capital Expenditure Commitments 102 145 based on Maturity Profile as at 31 December 2019 71 132 Cash Flows 85 138 Other Commitments 103 145 Hedged Portions of USD Statement Stock Appreciation Rights Plan 86 139 of Financial Position Exposure 72 133 Group leases of Offices, Ground Segment, Stock Appreciation Rights Plan: Movements in Assets and other Fixtures, Tools and Equipment, Sensitivity to a +/– 20% change in the Number of Share Options Outstanding and Information 2019 104 146 US Dollar Exchange Rate 2019 73 133 their Related Weighted Average Exercise Price 87 139 Group leases of Offices, Ground Segment, Sensitivity to a +/– 20% change in Stock Appreciation Rights Plan: Share Options Assets and other Fixtures, Tools and Equipment, US Dollar Exchange Rate 2018 74 134 Outstanding at the End of The Year 88 139 Information 2018 105 146 Split of the Nominal Amount of the Group’s Debt Equity Incentive Compensation Plan 89 139 Lease Liabilities 106 146 between Fixed and Floating Rate 75 134 Equity Incentive Compensation Plan: Movements Depreciation Charge of Right-of-Use Assets 107 146 Euro Interest Rates 76 134 in the Number of Share Options Outstanding and Finance Cost 108 146 Impairment of Trade Receivables and their related Weighted Average Exercise Prices 90 140 Unbilled Accrued Revenues 2019 77 135 Equity Incentive Compensation Plan: Net debt 2018 and 2019 109 147 Impairment of Trade Receivables and Expiry Date and Exercise Prices 91 140 Movements in Net Debt for 2019 and 2018 110 147 Unbilled Accrued Revenues 2018 78 135 Long-term Incentive Programme 92 140 Group Management Compensation 111 147 Movement in Provisions for Trade Receivables Long-term Incentive Programme: average Value Group’s Subsidiaries and Associates 112 149 and Unbilled Accrued Revenue 79 135 of Inputs to the Model used for 2019 93 141 ANNUAL REPORT 2019 REPORT ANNUAL SES 176 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
TABLES GRAPHICS
Name Number Page Name Number Page
SES S.A. ANNUAL ACCOUNTS Purpose and Ambitions 01 22 Satellite Commercial Value Chain 02 27 Balance Sheet 113 156 Industry Trends, Major Market Trends and Profit and Loss Account 114 157 SES Focus 03 28 Statement of Changes in Shareholders’ Equity 115 158 SES Global TV Homes Reach 04 29 Movement in Shares in Affiliated Undertakings 116 161 Global Revenues Expectations from Shares in Affiliated Undertakings 117 161 Video Distribution 05 29 Loans to Affiliated Undertakings HD TV Channels Broadcast by Satellite 06 30 as of 31 December 2019 118 163 Ultra HD Channels Broadcast by Satellite 07 30 Loans to Affiliated Undertakings Aeronautical SatCom Addressable Market as of 31 December 2018 119 164 by Airframe 08 31 Amounts owed by Affiliated Undertakings 120 164 Capacity Demand by Force Type 09 32 Movement between the Opening SES Fleet in Multiple Orbits as of December 2019 10 34 and Closing Number of Shares 121 165 SES Ground Network 11 35 Maturity Profile of Notes and Bonds as at 31 December 2019 122 166 2019 Video Revenue by Segment 12 38 Maturity Profile of Notes and 2019 Networks Revenue by Segment 13 40 Bonds as at 31 December 2018 123 166 SES Approach on Corporate Responsibility Amounts owed to Credit Institutions and our Impacts 14 45 as of 31 December 2019 124 168 SES Employees—Geographical Distribution 15 53 Amounts owed to Credit Institutions SES Employees—Split according to Job Functions 16 53 as of 31 December 2018 125 168 Hours by Category 17 54 Maturity Profile of Amounts owed to Credit Institutions 126 168 Board Structure and Committees 18 65 Amounts owed to Affiliated Undertakings 127 169 Activities of the Committees in 2019 19 66 Staff Costs 128 170 Internal Control Objectives 20 70 Income from Participating Interests 129 170 Risk Management Structure 21 71 Income from Other Investments and Loans 130 170 Risk Map 22 75 Other Interest Receivable and Similar Income 131 170 Annual Bonus Calculation 23 89 Interest Payable and Similar Expenses concerning Affiliated Undertakings 132 171 Other Interest Payable and Similar Expenses 133 171 ANNUAL REPORT 2019 REPORT ANNUAL SES 177 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
FINANCIAL CALENDAR
2020 Q3 RESULTS ANNOUNCEMENT 5 NOVEMBER 2020
2020 H1 RESULTS ANNOUNCEMENT 7 AUGUST 2020
2020 Q1 RESULTS ANNOUNCEMENT 7 MAY 2020
2019 FULL YEAR RESULTS ANNOUNCEMENT ANNUAL REPORT 2019 REPORT ANNUAL 2 MARCH 2020 SES 178 1 2 3 4 5 OUR OPERATIONAL CONSOLIDATED SES S.A. ANNUAL ADDITIONAL COMPANY AND STRATEGIC FINANCIAL ACCOUNTS INFORMATION REPORT STATEMENTS
CONTACT
SES HEADQUARTERS Château de Betzdorf L-6815 Betzdorf Luxembourg www.ses.com
The SES Investor Relations team will be pleased to assist you with any questions you may have in relation to SES. Please reach out via [email protected]
CONCEPT AND DESIGN
MPM Corporate Communication Solutions Mainz, Germany mpm.de
PHOTO CREDITS
SES, Getty Images, iStock ANNUAL REPORT 2019 REPORT ANNUAL SES 179 SES HEADQUARTERS CHÂTEAU DE BETZDORF L-6815 BETZDORF LUXEMBOURG